Op-ed: Streamers are falling into many of cable and satellite’s old traps

In 1987, while working for Storer Cable, I was in Little Rock for a series of budget meetings. This was part of a corporate roadshow, during which meetings were held in or near locations where the company had large system clusters. I checked into the hotel, and the front desk clerk saw that I worked for Storer and said, “Oh great, you’re the third guy from Storer who has checked in today. Guess I can expect that increase in my cable bill in a couple of months. Happens like clockwork every time you folks show up.”

I took my key and headed up to my room. I thought to myself, have we really become that predictable? Do our customers just expect us to routinely ding them with an increase each year without providing at least some modicum of additional value? Keep in mind, this was in the plain vanilla cable years. No broadband, no fixed or wireless phone lines, no security services, and far fewer channels than today’s bundles.

Streaming is now repeating some of cable and satellite’s worst habits — predictable price creep, inconsistent value, and underestimating how easy it is for customers to leave. The difference? Cable customers were trapped. Streaming subscribers aren’t. And that makes the old sins even more dangerous. They are facing many of the same complaints I used to hear from subscribers. “Nothing to watch” and “getting too expensive” were the most common.

Cable and satellite companies had a quasi-monopoly in most cases. Many markets only had a handful of local stations that could be picked up over the air. Streaming? We didn’t even have email. On top of that, cable and satellite companies made it very hard to disconnect from their services. You had to talk to someone in the office, wait for a service guy, return the converter box, and if you were really unlucky, you got to wait for a service agreement to expire.

Streamers have no such barriers to dropping their services. You hit a few buttons on your phone, and you are disconnected. Then, to add the service back, you just hit a couple more buttons, and you are back in business. Turns into a bit of a revolving door. The Streamers have now run up against that dirty word that we all despised at the cable and satellite companies…CHURN!

With subscription growth inevitably slowing and the proliferation of streaming services intensifying competition for top content, engagement is starting to decline. And when subs figure out they aren’t using a particular service, the likelihood of that service being dropped increases significantly. Even more so when the inevitable rate increases begin.

Subscription television models have thrived when they deliver a well-rounded slate of offerings that appeal to a wide variety of subscribers year-round. If you have glaring holes in your line-up, you will be quickly exposed.

To fill those holes, a number of streamers have added sports to their offerings. Netflix with some NFL games, MLB Home Run Derby, Women’s World Cup, and WWE. Prime has the NFL, NBA, WNBA, NHL in Canada, and a package of local New York Yankees games. Apple TV has some MLB, MLS, and Formula 1. Even Peacock and Paramount+ have joined with some exclusive offerings not available on their network brethren.

So, what’s the play for the streamers? What can they learn from the recent past so they don’t end up in the same place as the current purveyors of the “bundle”?

Streamers should avoid the “sins of the past”

• Find ways to increase revenues without raising subscription fees. Several have added ad-supported tiers, albeit with lower commercial loads than typical television or cable networks. Figure out this whole “password sharing” issue. In my cable days, we called it theft, and we took it very seriously.
• Consider, like Netflix has, adding YouTube-type podcasts, free on-demand platforms like Tubi and The Roku Channel, and linear FAST Channels. All can increase your engagement and won’t break the programming budget.
• Consider limiting the number of “binge” shows you release. While I won’t sit and watch 10 straight episodes of anything, there are certainly people who do. They are also likely the people who then drop the service and wait for the next “binge-worthy” offering. Creating a year-round content slate is your best defense against churn.
• Season-long sports packages can provide some insurance if the scripted dramas aren’t providing the drawing power they once did. Be selective, though. Lower-tier sports properties aren’t going to move the needle for most subscribers.
• Use your technology to your advantage. Check account usage and apply some form of algorithm that might clue you into how “sticky” that subscriber is. Then develop a plan to retain them.
• Expand your “bundling” and tie-in efforts. I know that is a dirty word from the past, but it does work.

Take my case as proof-positive for the merits of bundling. Currently, we subscribe to DirecTV satellite with HBO. That gives me HBO Max and the DirecTV satellite streaming app, which I run on a bunch of Roku-enabled TVs. That eliminates the need to rent extra satellite boxes from DirecTV and provides easy access to Tubi and The Roku Channel, and puts all of my apps in one place. Being a DirecTV subscriber also provides me with free access to ESPN Unlimited and Fox One.

We are heavy Amazon users, so the Prime membership saves us quite a bit on shipping and gives us access to Prime Video. Being bundled into the Amazon Prime Membership price is a big advantage, as most people have no idea how much they are paying for Prime Video. Hulu comes with my Amex Platinum card (Schwab pays for the card). Amex also gives me a free Walmart+ subscription, which gives me a free Paramount+ subscription. Apple TV is included for free with our Chase Sapphire credit card.

We do pay YouTube for NFL Sunday Ticket and Netflix for a standard subscription. We had a great deal on Peacock, but it lapsed. (Holding out hope for a freebie from DirecTV or some sort of Black Friday deal from Peacock.)

There are hundreds of these “bundles” out there, but I find that many aren’t promoted very well, and you have to go hunting for them. Promote your tie-ins and bundles. It gives people the feeling they are getting something for nothing and makes it more likely they will keep and value your service. Getting them to watch is another matter.

Why take any ideas from a guy who worked on sports networks for most of his career? Well, I was that cable operator guy for eight years. Also, remember that RSNs began life as monthly pay services selling for $8 to $10 each month. We fought many of the same issues that streamers are right now (seasonal programming subject to significant churn based on team performance and the calendar). Converting to basic carriage level helped “mask” the actual cost of the RSNs. This worked well for 25 years until the bundle cost got out of line, and the superior streaming technology model upended the RSN business plan in a short period of time.

As subscription fatigue grows and prices creep up, retaining your existing subscribers becomes vitally important. It’s a lot cheaper to keep the ones you’ve got than to go out and acquire a new one. Ask that guy at the hotel in Little Rock.

Bob entered the television business in 1981, when he sold his first cable subscription to a nice lady in Aloha, Oregon. After eight years in cable marketing and ad sales, he moved to Liberty Sports’ RSN group as VP/GM of Prime Sports Network in Denver. Liberty Sports was later sold to FOX, where he rose to President of FOX Sports Networks and FOX Sports International. He stepped down from full-time work at FOX Sports in 2009 but remained an advisor through 2015. He continues to work in the industry through his consulting firm, Thompson Sports Group, LLC.

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