Collaboration between programmers and distributors is necessary to reverse consumer satisfaction trends across pay TV and streaming.
DIRECTV was founded 30 years ago to deliver content across a wide array of programmers in a single straightforward experience, something programmers couldn’t do on their own. Since that time, our investments have led to groundbreaking developments in our industry, including out-of-market sports products, the original NFL RedZone, HD and 4K/ultra-HD channels, mix channels covering golf and tennis majors and the Olympics, DVR content on the go, and much more.
The entertainment ecosystem has recently undergone a significant transformation with the emergence of programmer-specific direct-to-consumer (DTC) services. This shift has given consumers a more comprehensive range of options to view content at lower individual prices. However, consumers have grown increasingly frustrated with their experience as DTC services have created significant fragmentation at higher cumulative costs.1
Unfortunately, while DTC offerings have evolved, pay TV packages have remained largely unchanged. Instead of allowing distributors like DIRECTV to also develop smaller, more tailored packages at prices that reflect the value they get from the content, programmers have continued to impose and enforce strict bundling requirements through exorbitant minimum penetration rates – the minimum proportion of a distributor’s subscribers required to access a channel. These antiquated requirements force pay TV customers to subscribe to many channels they may not watch, which have yielded ‘fat bundles.’ At the same time, programmers have reserved flexible genre-based offerings solely for themselves, eroding the price-value proposition for pay TV customers by shifting the best programming to DTC services while raising programming fees on pay TV.
Venu, the recent joint venture across multiple programmers, is a perfect example. The programmers who created Venu – The Walt Disney Company, The Fox Corporation, and Warner Bros. Discovery – sought to bring a sports-centric streaming service to market until it was blocked last week by a U.S. district court on the grounds of severe antitrust concerns and the “near monopolistic control” that the Venu JV partners would exercise over the market. DIRECTV applauds Judge Garnett’s ruling that the creation of such a genre-based product should not rest entirely with these media giants. We agree with Venu’s shrouded market-sizing estimates that were unearthed during the trial that recognize an “ocean of opportunity” to offer consumers skinnier packages. However, we disagree with Venu’s anti-competitive strategy and believe that TV distributors should have the same flexibility to thrive alongside DTC services by offering genre-based packages that extend beyond sports to include locals, entertainment, news, family, movies, and others.
DIRECTV believes that programmers need to collaborate with pay TV distributors to deliver entertainment options that align with consumer preferences, including:
- Flexible Packages. Consumers want the ability to choose from genre-based programming without piecing together and purchasing an extensive lineup of channels that don’t meet their desires.
- Lower-Priced Alternatives. Consumers want price points closer to the DTC options they are familiar with and the ability to pay for all their programming through one platform.
- Aggregated Experience. Consumers want access to their favorite shows and sports and the ability to discover new content in one complete experience – live ‘linear’ TV or on-demand content from DIRECTV or a third party – instead of through numerous disjointed entry points while managing multiple individual subscriptions to those products.
Pay TV subscribers have been declining because of our collective failure to evolve to meet consumer preferences, not due to external forces. Without fundamental change, costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer.
At DIRECTV, we can smoothly transition to a model that will provide consumers with more choice, control, and value to complement programmers’ DTC offerings. Distributors like DIRECTV have asked programmers for the flexibility to launch skinnier packages for years. It is high time that we work together to bring that ocean of opportunity to fruition.
– Rob Thun, Chief Content Officer, DIRECTV
[1] Marketing Charts, Viewers Are Less Satisfied with Their Pay-TV and SVOD Services, April 25, 2024
