Why TV Mergers Aren’t the Solution to Streaming’s Flaws
That didn’t take long. Within a day of Donald Trump’s election as president, TV executives were signaling optimism that the new administration would make life easier for them by allowing the industry to consolidate. Warner Bros. Discovery CEO David Zaslav made the most articulate case on Thursday, presenting mergers as a way of helping out poor consumers who can’t figure out how to navigate the crowded world of streaming apps.
“Consumers put on a TV set and they see 16 apps. And each of those are doing different pricing. And you’re sitting there with your phone and Googling where a show is or where a sport is.…It’s just not a good consumer experience,” Zaslav argued. Not only is he right, but this framing is more likely to appeal to antitrust authorities than arguing that mergers would help TV companies cope with shrinking cable revenues by helping them cut costs.
Still, the idea that a veteran TV executive is worried about the consumer experience is a little ironic, given that TV executives gave us the world of high-priced cable TV, offering hundreds of channels people didn’t watch. And those they did watch were jammed with so many ad breaks you might think the programs interrupted the commercials rather than the other way around.
To be fair to Zaslav, he appears to have learned his lesson on advertising, noting on Thursday, “We have seen on cable that too much advertising really presents consumer challenges.”
What’s worrying, though, is that Zaslav (like other TV executives) is a big advocate for creating bundles of streaming services—basically cable TV–like packages where you pay one price and get several services. Already, WBD has created a bundle with Disney that offers WBD’s Max with Disney’s Disney+ and Hulu for $29.99 a month, all without ads. That’s a big discount on the $51.97 you’d pay to get the ad-free versions of those separately.
But if you think that discounted price will last, then I’ve got a bridge to sell you.
All the big TV companies have been jacking up prices on streaming regularly, to the point where most have erased the streaming losses that were straining their finances. But their streaming profits are still small, while the much more substantial profits from their cable channels are diminishing, as we saw in the third-quarter results today from Paramount Global and those from WBD on Thursday. That guarantees that prices of the new bundles will rise once people get used to them.
And if consolidation happens, there’s a risk that bigger bundles will come, costing more money and resembling cable packages with a mix of some programs you watch—and some you don’t. Zaslav may not be thinking along those lines, to be sure. But there’s a danger that allowing mergers will take us back to the worst of the cable world. That might be good for the companies, at least in the short term, but consumers are not likely to welcome it.