Under pressure from an expanding number of cheaper online video services, the long-dominant bundle of channels offered by pay-TV companies is becoming a bit more flexible.
Verizon said Friday that it would let customers pick groups of channels that interest them, a plan that is separate from the traditional bundle that has been offered to customers for years.
The penchant for pick-and-choose online video is reshaping pay-TV. More and more people, fed up with large cable bundles with dozens of channels they don’t watch and hate to pay for, are signing up for cheaper streaming services like Netflix. Amazon.com has also entered the game, as have HBO Now and Dish Network’s Sling TV. Apple is reportedly working on its own version, too.
Verizon FiOS president Tami Erwin said on CNBC Friday that while she expects some existing customers to switch to the new plan, it will also attract new customers.
But the new FiOS Custom TV option is still fairly expensive, starting at $55, and may not appeal to people who have already cut the cord, or who have never subscribed to cable TV packages, said Jefferies analyst Mike McCormack.
“This is going to be more for people who just want less content,” he said. “To me this feels sort of like a half-step. I don’t think ‘cord-nevers’ have an interest, frankly, in set-top boxes.”
If you want Internet too, the FiOS skinny TV deal plus Internet costs $65 to $85 per month. It also doesn’t include taxes, equipment and other fees – but it’s not a promotional price similar to those used by pay-TV companies to hook customers, including FiOS.
On FiOS' website, promotional prices for an Internet plus TV deal cost $75 to $85 per month for a two-year contract. That comes with more than 150 channels.
FiOS Custom TV, available Sunday, has a setup similar to some new online entrants, although bigger, pricier and, of course, not an online video service. Dish’s Sling TV Web service gives you about 20 channels for $20/month, with add-on options including HBO for $15 and other pre-selected channel packs for $5 each. Sony’s PlayStation Vue service, an online package of more than 50 channels, starts at $50 a month.
Verizon will give customers the option to buy a base package for about $55 with more than 35 channels – such as AMC, CNN and Food Network – plus two additional channel packs that have themes including sports, children and lifestyle. You can add more packs, which have about 10 to 17 channels on average, for $10 each, and swap out packs after 30 days. There’s no contract required.
While momentum has been swinging toward streaming services like Netflix, many industry watchers believe that traditional TV is changing, but not necessarily facing extinction.
“This is more of an evolution than a revolution,” said Nomura analyst Adam Ilkowitz. “This is not Verizon saying the bundle is dead – there’s still a lot of bundling attached to it. This is an acknowledgement that consumer preference is maybe shifting.”
Only about 20 million households have access to FiOS, which has 5.6 million video subscribers and 6.6 million Internet customers.
But the shift by Verizon Communications Inc. could put pressure on bigger TV providers.
“If Comcast is wise they can move more into the skinny bundle,” said McCormack. “I would expect current cable operators to at very least try to replicate something like Sling is doing. At least get your hat in the ring.”
Verizon shares fell 27 cents to $49 in afternoon trading Friday. Its shares are up almost 3 percent over the past year.
Michelle Chapman and Mae Anderson contributed to this report.
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