The Technology Policy Institute just went live with a video of their OTT event, exploring TV unbundling. There is a lot of solid material, but Laura Martin, a Senior Analyst at Needham & Company, explained what would happen if we went to an unbundled world:
- As soon as you unbundle, you lose advertising revenue. Immediately, you have to double the cost because of lost ad dollars.
- 1/2 of the revenues come from ads and the other 1/2 comes from subscription.
- Currently, the market is $150 billion a year for TV revenue with a $400 billion in market cap.
- Remember, in order for Nielson to measure for ads and thus calculate ad dollars, you have to reach 20 million homes.
- By her projections, only 30 channels of 500 would reach this number. So, the other 400 or so would have to double their costs to consumers.
- Currently, everyone one of those channels reaches the homes out of the 150 million, and there is an easy way to change channels.
- Subscriptions are 5 year terms and tend to step up over time.
- So, advertising moves away from TV the fastest in a la carte world.
- Currently, the cost of content is $40 per household and what we would see is about 15 channels, which is generally the average around the world.
- Everyone does consume the major 15 channels, but households tend to have passion channels that will lose out in this world.
Bruce Owen also noted that if we force suppliers to provide services a la carte, then how do we know if they are pricing the various channels correctly? We will have to look at costs because supplying the bundle costs less than supplying the a la carte channels. So, we are in a world of rate regulation.