Both hard bundles and “aggregator 2.0” bundles are different solutions to the same problems: (1) scaling a streaming app’s user base by offering ease of opting-in, and (2) also retaining the user.
To remind you:
According to Paramount Global President and CEO of Streaming Tom Ryan, hard bundles are when a streamer works with a local provider “to give their customers immediate access to a streaming service (e.g., Paramount+), as well as direct-to-consumer and à la carte distribution or sometimes a hybrid of all three."
“Aggregator 2.0” bundles offer “the ability to personalize offerings like never before, mixing and matching television, news, e-commerce, gaming, health, and any other service that charges a monthly or annual subscription rate.”
But, watching the Tiger Woods comeback narrative play out at The Masters this week, I wondered whether these bundles still don’t solve for the expensive bets that legacy media streamers have made on sports streaming rights.
It’s Disney’s integration of Hulu and ESPN+ that raised the question: if they had not bundled these two services, how would I find the broadcast of Woods as a cord-cutter? And when I found it, how easy would it be for me to watch it?
Because of the Disney+ bundle on Hulu and ESPN+, it’s relatively easy to find and watch. But, it still has friction in the funnel of getting me from awareness to viewing.
Disney+ Bundle & UI
The important thing to note here is that Disney’s bundling model here is two-fold:
First, the Disney+ bundle with Hulu and ESPN+ offers the consumer a ~40% discount for signing up for all three ($13.99). That makes it compelling for consumers to enter the Disney+ ecosystem.
But, second, Disney is also leveraging the Hulu software user interface (UI) and user experience UX) to put The Masters ESPN+ broadcast one click away on Hulu.
So the Disney+ bundle consumer has two choices to watch the Tiger Woods comeback narrative:
ESPN+ app, or
Hulu, with the caveat that the consumer may only watch The Masters Disney+ bundle subscription (or, in the more limited use case that they only subscribe to Hulu and ESPN+).
Disney has made The Masters easy to find, and easy to access (one-click from the home page). So, Disney has made the discovery of and access to The Masters ESPN+ broadcast easy for subscribers by offering it across multiple services in its first-party bundle.
It is important to note that Disney’s rights to The Masters (via ESPN) are part of a larger $680MM deal that the PGA made with CBS Sports, NBC Sports and ESPN. So its economic burden here is relatively minimal when compared to the $2.7B per year it will be paying the NFL through the 2033 season.
But the solutions to discoverability and accessibility that the Disney+ bundle and the Hulu and ESPN+ UI offer are as important to the NFL deal - if not multiples more important - than they are to The Masters.
Effectively it is the difference between over-delivering on the available ad inventory (which, as Connected TV inventory, could be more valuable), or spending the rest of 2022 delivering make-goods for those same advertisers. [1]
Why UI & Bundles Must Go Hand-in-Hand
In linear, there was always an easy-to-discover location to watch The Masters: ESPN or CBS. So, when you have a comeback story like Tiger Woods - who is playing his first major PGA tournament since a potentially career-ending car accident in 2020 - advertisers on both channels are going to be happy with the tune-in numbers because those channels are available on over 70MM homes nationwide. [2] Effectively, tuning into Tiger Woods was always one click away.
That is no longer true in streaming: one needs to load either the ESPN+ or the Hulu app to watch.
But then, within ESPN+ or Hulu, they can click again and immediately access the streaming version of the broadcast. That is not true in other apps: for example, Paramount+ and Peacock often require navigation to the Sports tab to find the broadcast of a sports event, and then multiple clicks to choose and launch a game.
The Big Question: Connected TV Bundles?
If this week’s Masters suggests Hulu and ESPN+ are arguably the best bundle experience in terms of economics and UI/UX because they are more likely to make consumers and advertisers happy, is there a better UI/UX possible out there that can will both happier?
Because the Tiger Woods story is effectively lightning-in-a-bottle TV, an extraordinary return under extraordinary circumstances. But, the user experience of streaming makes it harder for 120MM U.S. households with permanent internet access via broadband to consume it over streaming than linear. Hulu and ESPN+ have made it easier, but there is still friction.
More friction between viewers and the feed means fewer viewers, and in turn, fewer ad views. Fewer ad views, in turn, will result in disappointed OTT and CTV advertisers, the precise outcome that Disney does not need as it builds out its ad-supported OTT story for advertisers across Disney+, ESPN+ and Hulu.
Instead, I think Disney is proving with its Masters broadcast on Hulu and ESPN+ that what needs to happen in sports streaming is a solution with fewer clicks between the broadcast and the consumer. Effectively, Disney and other legacy media sports rights holders need the home screens of Connected TVs to offer instant, one-click tune-in to sports events from more expensive rights deals like the NFL, La Liga matches or the NHL.
It’s not clear yet how we get from here to there - Smart TVs control the last mile to the consumer, and they can extract rent for better distribution. But there is a lot of friction that still exists between the streaming consumer and the streaming sports broadcast that even the Disney bundle UX fails to solve within Hulu.
Less friction will create more value for streamers - more consumers and happier advertisers - but more friction can be more expensive to streamers with billions of dollars to recoup each year from rights deals. The obvious solution for less friction starts with making deals with Connected TV manufacturers to make sports events one click away for users.
And, if Connected TV manufacturers can bundle multiple sports events across multiple services by making them one click away, then they may be a better bundle for sports viewing, specifically, than just the Disney+ bundle with Hulu and ESPN+.
Footnotes
[1] As I wrote in A Short Essay on The Connected Future of Make-Goods & RSNs:
Make-goods solve for when the impressions for an ad have not reached a volume that met the pre-arranged acquired impressions - the mille of the Cost Per Mille (CPM) - and/or their intended demographic because of underperformance and/or error.
[2] Although sports betting companies may be liable for millions if Tiger Woods wins).