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Skinny Bundles appeal to young non-subscribers

So-called ‘skinny bundles’, TV packages composed of selected channels targeting specific customer segments, have the potential to attract elusive younger consumers to pay-TV, according to strategy consulting group Altman Vilandrie & Company’s 7th annual consumer video survey.

However, the survey also shows that two-thirds of older consumers, pay-TV’s most reliable subscribers, say they are wasting money for channels they don’t use, meaning skinny bundles could end up cannibalising the existing subscriber base.

Skinny bundles are designed to attract younger viewers, who have come to expect more consumer choices and flexibility, with targeted, affordable packages. Nearly 70 per cent of non-subscribing 18-24 year olds—more than any other age segment—agree that they would consider subscribing to pay-TV if there were “more affordable channel lineups that fit my viewing tastes”. The pay-TV industry is anxious to appeal to young consumers, who subscribe at much lower rates than other age segments. This group includes both ‘cord cutters’, who have dropped pay-TV, and ‘cord nevers’, who have never subscribed.

“The surprising level of dissatisfaction with unwanted channels we found among older subscribers shows the difficult balancing act skinny bundles create for pay-TV providers,” said Jonathan Hurd, the Altman Vilandrie & Company director who leads the survey project. “It is critical for providers to design optimal bundles that maximise adoption of new subscribers while simultaneously limiting appeal to existing customers – no small task, based on simulations we’ve run using the survey findings.”

Skinny bundles of live TV channels from Internet providers Sling TV, PlayStation Vue, and soon Hulu seek to target price sensitive consumers who are comfortable watching online video. But DISH’s new Flex Packs have extended the skinny bundle concept to traditional pay TV. Skinny bundles may end up attracting older consumers disproportionately: 63 per cent of pay-TV subscribers aged 55 and older—more than any other age range—agree that they are “wasting money because my pay-TV service includes many TV channels that my household does not watch”. This age group is far less likely to switch to online video services—only 30 per cent watch TV shows or movies online weekly—but may end up downsizing to skinny bundles that include traditional pay-TV channels.

The survey confirmed that young consumers turn to more economical online video options rather than traditional pay-TV. Seventy-five per cent of 18-34-year-olds watch online video from Netflix, Amazon Prime, or Hulu Plus at least once per week, far more than the 22 per cent of consumers age 55 and above. And the trend among younger consumers toward online sources continues to grow: in a typical week, nearly 80 per cent of 18-24-year-olds watch TV shows or movies on the Internet, up from 60 per cent five years ago.

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