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2024 promises to be the year of the streaming pack

The ambiance of the Disney Bundle celebrating National Streaming Day at The Row in Los Angeles on May 19, 2022.

PresleyAnn | Getty Images Entertainment | Getty Images

This year once again proved difficult for pay TV as more and more people cut the cable.

But it hasn’t been very kind to streaming services either, as platforms have faced falling subscriber numbers, falling ad revenue, and continued losses while Netflix continued to assert his domination.

Yet the era of the cable package is giving way to the era of a new type of package that could provide a path forward for streamers and cable companies. Media executives told CNBC this month that 2024 could finally be the year media companies take consolidation seriously.

“The Charter-Disney deal was a sign of the times,” said Macquarie analyst Tim Nollen.

Disney and cable giant Charter Communications fought over fees during the lead-up to the National Football League season, with Charter CEO Chris Winfrey saying it was not a “typical transportation dispute.” Disney-owned channels, including ESPN, stopped broadcasting to millions of customers of Charter’s Spectrum service for nearly two weeks.

The blackout ended in September, hours before “Monday Night Football” kicked off on ESPN, with a deal that gave Spectrum TV Select Plus subscribers access to the ad-supported tier of Disney+, as well as ‘at ESPN+.

Similar deals could well emerge in 2024, given the large subscriber base and positive revenue implications for pay-TV and broadband companies, Nollen added. John Malone, chairman of Liberty Media and cable television pioneer who is also a board member of Warner Bros. Discovery, earlier this year, predicted greater integration of streaming services into cable offerings.

Mergers and acquisitions would also lead to more consolidation. Paramount CEO Bob Bakish and Discovery Warner Bros. CEO David Zaslav met last week to discuss a possible merger of the two companies, although discussions are in their early stages.

Despite the demand for a streaming package, top players have always been reluctant to enter into such a deal. Companies should navigate the balance between calculating average revenue per user, or ARPU, and subscriber growth when offering their services at a discount.

A discounted plan could reduce ARPU, but if subscribers grow by leaps and bounds thanks to the plan, it could make up for that loss. Media companies that also host cable networks might worry that a streaming package could cannibalize their cable packages.

Major streaming platforms have already made big strides in 2023. Disney agreed to buy the remaining third of Comcast’s stake in Hulu, a long-awaited move. Disney also began rolling out its combined Disney+ and Hulu platform earlier this month, with a full release planned for March 2024. Disney already offers a three-way bundle of Disney+, ESPN+, and Hulu.

Paramount Worldwide and Apple, earlier this month, were reportedly considering a bundle of Apple TV+ and Paramount+. Verizon, which offers cell phone and home Internet plans, is reportedly preparing to offer a bundle of ad-supported Max and Netflix tiers to Verizon customers for $10 a month, or $7 less than a separate subscription.

Integrating streaming into pay-TV offerings could bring much-needed benefits to the industry. Advertising revenue has declined significantly for pay TV and is on track to face an 18% decline this year, according to media investment firm GroupM. Streaming platforms’ ad-supported tiers, which are often included in bundles, generate higher ARPU for cable companies because of the ad revenue generated, Nollen said.

A source told CNBC that Warner Bros.  Discovery considered merging with Paramount Global

Much like pay TV providers, streaming platforms have faced subscriber losses over the past year, albeit at a slower rate. Streaming leader Netflix, for example, decided to increase the price of its plans while rolling out ad-supported tiers to compensate for subscriber losses.

Zaslav warned last month of “generational disruption” and pointed to the company’s streaming service Max, which he said was “losing billions of dollars.” Warner Bros. Discovery did, however, make a profit in its streaming segment, according to the company’s latest quarterly earnings report.

The Disney-Charter deal provided a framework for cable operators to evolve their business models into the streaming era and stabilize subscriber trajectories, according to Ampere Analysis.

“Charter manages to protect and hopefully increase prices for its subscriber base,” Nollen said. “Disney and Warner Bros. Discovery have the most upside potential” from the bundling trend “given the breadth of content on their combination of services and the fact that they are already beginning to bundle them.”

Disney, Warner Bros. Discovery, Paramount, Netflix and Apple did not immediately respond to CNBC’s request for comment.

—CNBC Alex Sherman contributed to this report.

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