Continuing a series of articles about trends in the content business, Parrot Analytics’ entertainment industry strategist Brandon Katz explores the issues surrounding the rebirth of bundling as streamers combine their services on the same platforms.
We consumers are fickle creatures. We rightfully complained that the bloated pay TV model charged too much money for a sea of rarely watched channels. Now, we’re understandably upset about the increasingly fragmented nature of entertainment in the direct-to-consumer era and the succession of streaming price hikes in recent years.
The whiplash of preferences almost makes you feel bad (but not quite) for these multi-billion-dollar corporations trying to keep up.
But entertainment media is hoping to split the difference and find the right balance with a renewed emphasis on streaming bundles. Notably, Warner Bros Discovery has joined forces with The Walt Disney Company for a combination of streamers Max, Disney+ and Hulu (although an official product name and pricing have not yet been announced). Meanwhile, NBCUniversal’s Peacock, Netflix and Apple TV+ have formed an alliance called StreamSaver, a new US$15 bundle.
Which bundle will provide more value to consumers, and within that, which individual streaming service stands to gain the most? And what does it all mean for consumers? Let’s dig in.
The question of value
StreamSaver will be available only to Comcast customers and include the ad-supported versions of Peacock and Netflix (Apple TV+ does not currently offer an ad tier). The Max, Disney+ and Hulu collection will be available in both ad-supported and ad-free plans. Will these bundles be competitively priced?
Based on Parrot Analytics’ total catalogue demand vs price of each US library, an ad-supported version of Max, Disney+ and Hulu is projected to cost US$18.38 per month (see below chart), while an ad-free version should cost between US$23-US$29 per month.
At US$15 per month, StreamSaver is arguably over-priced by a dollar based on total catalogue demand, according to Parrot Analytics. The bundle has 16% more demand than the current Disney+/Hulu combination yet is 50% more expensive. However, the inclusion of an ad-free Apple TV+ tier does help to make up the difference. (By the way, I recommend For All Mankind to any new Apple TV+ subscribers.)
Still, the Warner Bros Discovery (WBD)/Disney tag team looks to provide more bang for a consumer’s buck overall. This positions the collection of content as a major value to subscribers. As such, we are going to focus on the Max, Disney+ and Hulu cohort.
Finding the individual streaming winner
The catalyst for working with a supposed corporate enemy on a bundle is the hope of reducing churn or cancellations, which has been streaming’s Achilles’ heel. Instead of the laborious process of cancelling a cable subscription, which companies relied on being more hassle than it was worth, consumers can now axe a subscription with the single click of a button.
These bundles may add fewer overall subscribers given the pre-existing overlap between customer bases, but the most important piece of this puzzle is the retention value. When looking at the WBD/Disney bundle, Max’s retention index projects to improve three times as much as Disney+ or Hulu within this grouping.
As a streaming platform decreases churn and increases retention, customers tend to stay subscribed for longer, which ultimately improves the lifetime value per customer. These are key metrics in creating healthy longevity. Max is already a profitable streamer, based on the company’s earnings reports – although that includes linear HBO financials – and this bundle will ideally set up a stickier ecosystem.
Disney+ and Hulu have less to gain in the retention category but are clearly looking for more scale and ad-supported inclusion. Company executives have repeatedly said its combined streaming operation should be profitable by the September quarter of this year.
The issue of content complement and overlap
Another element that can make WBD CEO David Zaslav and Disney CEO Bob Iger’s new streaming behemoth really sing is the difference between their programming catalogues. Max, Disney+ and Hulu share less than 5% of small-screen titles across their libraries, according to Parrot Analytics’ Content Panorama.
This underscores the singular value propositions each brings to the table. Hulu provides the largest TV catalogue of the three, with 42% of the new platform’s small-screen supply, while it is the go-to source for next-day airings of hit linear series.
Max’s TV library will account for 39.7% of the supply and can lean on the culture-shaping HBO, the varied Warner Bros theatrical slate and addictive reality programming. Disney+, meanwhile, brings the smallest TV library at just 13.7% of the new platform’s total, but it’s punching far above its digital weight with unrivalled franchise power across the big and small screens. (Pixar is hoping to rebound this year with Inside Out 2 and the upcoming Disney+ original Win or Lose while anticipation for Marvel’s Deadpool & Wolverine movie is high.)
The total catalogue demand, which includes both original and licensed films, of the combined bundle would have been twice as much as market leader Netflix in the US as of April 2024.
Scale for scale’s sake does not always equate to subscription growth and churn reduction, of course. The differentiated combo of HBO Max and Discovery+ did not lead to a streaming boom. But this particular bundle could prove to be enticing, especially if WBD and Disney creatively integrate added value from across the company ecosystems and not just streaming (good luck trying to catch YouTube, anyway). While Max stands to benefit most from a churn-reduction standpoint, consumers may wind up as the biggest winners overall.
