Subscription Add-ons are better than Bundles
Subscription Add-ons are better than Bundles
When you get a message like this from your cable or satellite provider, it's clear that consumers need more choice to subscribe on their own. Read: "Everything Starts Out Looking Like a Toy" #214
Hi, I’m Greg 👋! I write weekly product essays, including system “handshakes”, the expectations for workflow, and the jobs to be done for data. What is Data Operations? was the first post in the series.
This week’s toy: a visual filter to turn moving images into ascii characters. It’s like encoding your videos into the Matrix. Or at least, it looks kind of cool when they get de-rezzed into individual characters. Edition 214 of this newsletter is here - it’s September 3, 2024.
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The Big Idea
A short long-form essay about data things
⚙️ Subscription Add-Ons are Better than Bundles
If you subscribe to DirecTV and you were trying to watch the Phillies and Braves play baseball on Sunday, September 1, you got a temporary message that the channel was unavailable and then a cryptic message about a carriage dispute between Disney and DirecTV.
This dispute stems from the split in per-subscriber revenue that Disney and DirecTV divide from the subscription revenue DirecTV takes monthly from subscribers like me.
Bundling brings distribution
In the days before content was distributed over the internet, this arrangement … made sense? Bundling through a cable provider or an over-the-air network provided distribution through a relatively closed network to a viewership that couldn’t get this programming any other way.
To the viewer, there were hundreds of channels! This was great except most of them never provided anything you wanted to watch. The FCC also made sure that local programming was provided on these closed networks. But there was a catch. Some channels were exclusively negotiated provider by provider. For ESPN, that monthly fee is now $9.42 per subscriber.
For the cord cutter, that means that ESPN would be happy to take your money, but you would have to pay something close to $25/month for the privilege. In all likelihood, ESPN would have fewer subscribers for a while at that price point than they do today.
But I don’t want all of the channels I don’t watch
If you’re like me, you don’t watch that many channels on what we used to call television. Instead, you’re stitching together some combination of:
an OTT (over the top) service like Roku, DirecTV, Xfinity, YouTube TV, U-Verse, or similar
two or more streaming services like Netflix, Disney Plus, Paramount, Peacock, PBS, or similar
content you can’t see anywhere else that gets syndicated to places like YouTube, but is annoying to arrange into a single view
In short, you’re paying for a lot of capacity that you don’t use.
Darn it, I still need a bundle for a few channels
You’ve probably also noticed that there are some channels you can’t buy individually that are only available in a bundle. ESPN is one example, but there are others like regional sports networks and other speciality items.
It turns out to be hard to subscribe a la carte to a “skinny bundle”, or something like:
local channels
+ regional sports channels
+ a few like CNN, MSNBC, etc
While leaving the rest of the “discretionary” channels to individual subscriptions like Peacock, Disney+, Paramount, MAX, and Netflix.
There’s a reason for this. Trying to find what’s on and where can be exhausting, as there is no unified OTT experience to blend individual sources into one view. (Apple TV does a decent job at this, but still feels like it’s jumping back and forth between “channels” or “apps” as opposed to a unified view that integrated all of these streams into something that looks like … cable tv.
We’re in 2024. Why do we still have bundles?
The practical reason we still have bundles is that anything else feels pretty disjointed to the casual consumer. We’re not talking about the media nerds who arrange their Synology nodes into a media catalog they can access from every screen everywhere; we’re talking about the median user who today would use Xfinity or a similar service.
These services are popular because of two reasons:
they are easy to use
they are a de facto monopoly within many markets
We have bundles today because they are an efficient way of separating customers from their money while allowing most of the choice (or at least some of the choice) you would have otherwise. Bundles let the provider build a bigger pot of subscriber cash and a (hypothetically) larger pool of subscribers for ad-supported channels.
We all know that most people don’t watch that many channels. So what else could we do to improve choice?
Add-ons are one way to increase choice
When I got that screen from DirecTV, I wanted to do two things:
subscribe directly to ESPN so that I could continue watching the game
remove the cost of my ESPN access from DirecTV
Neither of these options are available today, but they could be an interesting solution. If I could add and remove ESPN temporarily given my watching preferences, I might tolerate options like:
A higher price with the option of turning the channel on and off independently with ESPN
A lower price with the option of turning the channel on and off with DirecTV, but tied to a bundle of channels
No longer having the channel available on DirecTV and having a lower price
Obviously DirecTV would prefer something like option 2, and ESPN would prefer something like option 1. From the perspective of the customer, the current options are not great, remove customer choice, and contribute to the overall confusion of “where can I watch that thing?” Creating a system of add-ons (ideally with both the provider that offers access and the independent channel) will be the future direction once broadcasters and distributors adjust to the new normal of cord-cutting.
Xfinity is already testing new options by bundling access to multiple streaming services, making it convenient to add content within the same interface. But this is not a true add-on where you can decide to turn a channel on or off when you need it.
There’s a market opportunity for an aggregation service to present programs from all your streaming services and show them in one interface. Almost like cable tv, but reinvented for today’s internet.
What’s the takeaway? Bundles of subscriptions are painful to pay for when you don’t use many of the components and easier to use than individual subscription apps. We need a middle ground that improves content discovery and choice while leveling the playing field between content providers and distributors. As customers, there’s no point of being trapped in a subscription you don’t want, while not being able to purchase one you need.
Links for Reading and Sharing
These are links that caught my 👀
1/ Dishwasher = restaurant ops - The last time you visited a restaurant, did you think about how well the back of the house was working? One of the key positions is the dishwasher, one of the hardest jobs to do well.
2/ Whole company support - Working for a company that truly embraces the customer journey is inspiring. I loved this article about Posthog and how they ask their engineers to support customers directly. What better way could you imagine to make sure you are fulfilling customer needs?
3/ 20th century retail - I remember being pretty excited when receiving the Radio Shack catalog in the mail. Archiving these long-ago documents seems like a perfect task for the Internet. One thing that stands out is that many of these devices no longer exist, replaced by a smartphone or other multipurpose machines.
What to do next
Hit reply if you’ve got links to share, data stories, or want to say hello.
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The next big thing always starts out being dismissed as a “toy.” - Chris Dixon