Internet TV could be about to get a lot cheaper—and scarier for cable
<>By Jason Abbruzzese
<>1 day ago

Internet TV poses an important question: Would you give up a name-brand
channel for a version you've never heard of to save money?

For instance, would you take startup Cheddar over CNBC? Newsy instead of
CNN? TheBlaze instead of Fox news?

Maybe not, but what if it meant a $10 bundle?

"We can debate whether Cheddar, which is basically 18 months old, is what
percent as good as CNBC. Is it 3 percent? Forty percent? We can have that
debate," said Cheddar CEO Jon Steinberg. "But at the end of the day, it's
free to the distributor."

Cheddar is one of a new group of media upstarts that have channels right
alongside major cable companies on so-called "skinny bundles" of TV offered
over the internet, such as Sling TV, which offers a base package of 29
channels for $20. The average cable plan hovers around $100

The skinniest bundles, however, are yet to come. Cheddar and similar
channels are providing TV-like content on the cheap, a prospect that could
threaten their far bigger competitors. A super-skinny bundle would not just
be smaller, but substitute in cheaper versions of some channels.

Newsy, for example, has around 80 people and is based in Columbia Missouri.
CNN employs around 3,000 people across 38 locations around the world.
They're both on Sling TV.

"We don't have thousands of people on staff, so we can make a product that
looks good with stories that CNN wouldn't necessarily cover," said Blake
Sabatinelli, general manager of Newsy. "And we can do it for so, so much

Price didn't used to be as much of an object. Cable TV had a firm grip on
its subscribers, who didn't have options to look elsewhere. Bundles got
bigger and prices went up—and there was little anyone could do to stop it.

Until the internet came along. Now, online TV bundles are competing
head-to-head with price as a prime factor.

"Price is very important. When you look at reasons people cancel pay TV,
the top three reasons are all price related. Either the price is too high
or you make me pay for channels I don't want. It's all price related," said
Roger Lynch, CEO of Sling TV.

Coming up at 2 pm ET, we're talking with @yankees
<> shortstop @DidiG18
<>. Catch the whole interview on @sling
<>. #CheddarLIVE
<> ##SirDidi4Sure
<> <>

— Cheddar (@cheddar) July 6, 2017

Sling TV already has millions of subscribers and an increasing number of
competitors, including DirecTV, YouTube, PlayStation, and Hulu. As more
people cancel their hundred-channel cable subscriptions, these bundles are
becoming an important lifeline for cable channels that are missing out on
important viewership and revenue.

Whether cord cutters really want these channels is open for debate. The
skinny bundles mostly have the same old channels, with some differing
little from regular cable packages. And with younger people cutting the cord
and getting less of their news from the TV
the value of channels like CNBC and CNN to them is immediately

That makes Newsy, Cheddar, TheBlaze, and others an interesting proposition
for a distributor looking to differentiate their offering. Lynch said that
Sling doesn't have plans to test out a super-skinny bundle, but that he
expects another company will.

The question will be whether distributors can keep channels that people
want while substituting in others that help round out the package.

"I do think you'll probably see other services launch that attempt to
thread that needle," Lynch said. "But I think we're really well positioned
for that."

Demographics is a key part of the pitch. Cord cutters tend to be younger,
Lynch noted. That means in some ways, the newer channels are better geared
for internet bundles with young audiences.

"Maybe they don't have the same level of investment, but I think they have
strong appeal to the demographics they go after," Lynch said of channels
like Newsy and Cheddar.

"If you're a 26-year-old male or female, you might prefer something like
Cheddar or Newsy to Fox News because it just fits your demographic better,"
Lynch said.

The introduction of super-skinny bundles wouldn't on its own be a major
blow to cable companies, but it could add to their already sizeable woes.
Internet bundles have had some success in providing channels a way to
transition online without completely changing their business model. But if
distributors start opting for newer competitors to keep prices down, cable
channels would be caught in a difficult position.

The only other option might be direct-to-consumer options like HBO Now,
which are a tough sell.

"The reality is there's almost no scenario of the world where five years
from now we as consumers will be paying as much money as we're paying now
to have home video entertainment delivered to us," said Zack Kaplan, vice
president on the internet and technology team at venture capital firm
General Atlantic.

Cheddar might not be forever free to distributors, but the impact of cheap
TV options could have a lasting impact on the industry.

"What can [cable channels] do?" Kaplan said. "They can't lower their cost
to match or their business model blows up."
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