March Madness and the Limits of New TV Channel Packages

OTT offerings need more flexibility than 'skinny bundles' from Sony and Dish

There’s a set of rituals that accompanies my preparations to watch March Madness on TV each year: tuning in CBS’ “Selection Show,” filling in my brackets to predict who will win, and looking up my cable operator’s channel listings to figure out where on earth TruTV is on the dial.

It’s a sad commentary on the lowly status that this Turner-owned network, which shares TV rights to the games with CBS, TBS and TNT, occupies in my channel-cluttered mind. But the truth of the matter is that TruTV never graces my living-room screen about 360 days out of the year (a state of affairs the network cleverly satirized in a new marketing campaign).

And yet for a handful of days, TruTV does become a prime destination. It’s not alone in that regard either; there’s other channels that don’t register in my brain most of the year. But once in a blue moon, they become must-see TV due to some “event” programming that prompt them to pop on my radar.

Think about your own viewing behavior, and my hunch is you can relate. It’s a reflection of an overlooked attribute of the traditional channel bundle that people in the industry refer to as “optionality” — pay-TV subscribers’ ability to check out any channel whenever they desire.

The value of optionality is about be put to the test by the emerging trend of over-the-top TV options from a la carte choices like HBO Now to so-called “skinny bundles” like Sony’s Playstation Vue.

It’s not that OTT doesn’t provide great value in its own right by allowing budget-conscious consumers to make more targeted channel choices. But what this first wave of early adopters is reckoning with right now is how OTT limits optionality by restricting choice to a subset of the traditional channel bundle.

The research that OTT devotees love to tout is what a low percentage of all the many channels that get delivered to an average pay-TV household are actually watched: 17.5 out of 189.1 in 2014, according to Nielsen. But pay attention to the fine print: that 17.5 is defined as “consistently watched.” It would be interesting to see research on how many additional channels are inconsistently watched because there’s value to that viewing, too.

The customer value proposition for skinny bundles capitalizes on two powerful consumer impulses: viewer devotion to their favorite channels and viewer disgust with having to pay for channels they never watch. But what subs to Sling TV or PlayStation Vue may not account for is a middle ground between these two impulses subtle enough to risk being overshadowed by the aforementioned devotion and disgust: that favorite channels likely can’t cover 100% of the average viewer’s content choices.

Some consumers may have calculated the reduced price of skinny bundles is worth putting up with the occasional frustration, but others may not even be conscious of their need to stray beyond a subset of go-to networks until after they’ve dumped their pay-TV provider.

The presumption underlying OTT also seems to be that a consumers’ list of favorite channels doesn’t change. Negating optionality cuts off subscribers’ ability to even sample a new network that could conceivably become their favorite if they were given a chance.

Remember, watching TruTV for even just a few hours doesn’t just fulfill a one-time need for me to watch basketball; it exposes me to promotion for other programming on the network and opens an opportunity to make TruTV a new favorite. Come for March Madness, stay for “Barmageddon.” (That said, it’s worth noting that both Sling TV and PlayStation Vue offer TruTV).

If and when Apple cracks the OTT market, perhaps it would be shrewd to obtain enough rights to allow its users to sample any channel whenever they wanted, but the free viewing should be available for only one day beyond a certain core group of channels. Watching a channel beyond that core group would require paying an additional surcharge.

Such functionality would occupy a nice middle ground between the skinny bundle and traditional channel package that retains some optionality while turning it into an additional revenue opportunity.

Here’s another idea: Rather than presetting a group of channels into a skinny bundle, let users pick what channels they want from a broader menu of options. Call it the 20/20 package: A subscriber can pick which 20 channels they want from a a broad menu for $20, and can switch up their 20 every month. Want to make a mid-month substitution? Pay a surcharge.

As more market entrants follow in the footsteps of Sony and Dish, they would do well to evolve beyond OTT’s heretofore rigid confines and restore some degree of optionality.

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