http://adage.com/article/media/tv-programmers-put-subscriber-caps-skinny-bundles/297887/
TV Networks Put Subscriber Caps on Skinny Bundles and Streaming Video Services
Thinking about joining the ranks of cable cord-cutters and signing up for Sling
TV? Better act fast.
The companies whose channels are included in Dish Network's new online-TV
service are putting caps on the number of people who can subscribe. If the
limits are exceeded, content companies may have the right to pull their shows
and movies, said Geetha Ranganathan, an analyst at Bloomberg Intelligence.
Subscriber caps are a way for the media industry to cope with an increase in
viewers shunning traditional pay-TV packages with their hundreds of channels --
many never watched. Programmers like Walt Disney Co. and Time Warner can't
ignore the rise of online options, yet don't want these cable alternatives
growing too fast. Cable companies pay fees to programmers based on their
subscribers. If large swaths drop pay-TV plans for Sling TV or Apple's planned
service, it would mean less money for cable operators and certain programmers
alike.
"They want it to be a complementary product and not a competing product that
cannibalizes their core business," Ms. Ranganathan said. "They don't want it to
become too popular."
Programmers want the skinny bundles to help them reach the estimated 10 million
or so broadband subscribers who don't opt to buy pricey pay-TV packages, while
making sure those less-costly plans don't encourage people to cut the cord with
cable and satellite operators.
Not just streaming services capped
"It's still early stages," said Amy Yong, an analyst with Macquarie Group.
"They're all testing the market."
Subscriber limits aren't new. Cable companies that offer similar low-priced
packages with a dozen or so channels are often restricted to sign up no more
than 10% of their customers to such plans, said Rich Fickle, CEO of the
National Cable Television Cooperative in Lenexa, Kansas. That way, programmers
can ensure their channels on pricier tiers have a large enough audience to
maintain advertiser interest, he said.
Sling TV, introduced in February, offers about 20 channels for $20, including
Time Warner's CNN and TBS, as well as ESPN, Disney Channel and AMC, and
provides sports and entertainment series such as "Monday Night Football" and
"The Walking Dead."
Apple plans to debut a service this year with about 25 channels, according to
people with knowledge of the matter. Verizon Communications, the largest U.S.
wireless carrier, also intends to enter the web-based streaming market with a
slimmed-down package.
So far, Sling TV has signed up at least 100,000 subscribers, the technology
site Re/Code reported last month. By comparison, online video-subscription
service Netflix has more than 57 million members worldwide, with more than 39
million in the U.S.
Danielle Johnson, a spokeswoman for Englewood, Colorado-based Dish, declined to
comment on the number of people who have signed up for Sling or whether the
service has subscriber limits.
Limited content
Skinny bundles could have trouble gaining traction because their content is
limited or their price is too high to attract a large number of pay-TV
subscribers, Todd Juenger, a media analyst at Sanford C. Bernstein & Co. in New
York, said in a March 26 note to clients.
But industry executives still want to make sure they don't get too popular and
cite subscriber caps as a reason why the traditional pay-TV bundle is safe.
"Sling is by its agreements with the content owners itself limited to be sold
to people that don't have cable, with a limit of 2 million subscribers,"
Discovery CEO David Zaslav said at a media conference last month. "I don't see
à la carte or different bundles really having much of an impact here in the
U.S."
None of Discovery's channels is currently in Sling TV's lineup.
'Constructive' strategy
Agreements that use subscriber caps are "a constructive way to make an offering
to a given part of the market that does not undermine the other part of the
market," Time Warner CEO Jeff Bewkes said at a media conference last year.
But as the lower-cost packages increase in popularity, it will put pressure on
cable networks and pay-TVdistributors to reassess those limits, said Mr.
Fickle, whose group negotiates programing contracts on behalf of 900 smaller
cable-TV providers.
"It's going to grow, it has to," Fickle said. "Current programming agreements
have problems in adapting to that."
~ Bloomberg News
