Cord-Cutting Catalyst? Will AT&T’s $200 Bundle Backfire?

Many winters past, when paper still existed, Conde Nast or the like tried bundling ALL of selected household’s magazine subscriptions into one convenient bill.  Some bright spark’s idea was that would lower billing collection/delinquency costs for the publisher.  The result?  A HUGE wave of cancelled subscriptions.  People hadn’t realized how much they were spending on magazines.  By adding it all up in one bill, the publisher forced that reckoning.  Today’s push for “quad play” TV/wireless bundles risks a similar response.

AT&T is advertising a “bundled” satellite TV and AT&T Mobile package for $200 a month (AT&T now owns DirecTV).  My guess is that it backfires.  Sticker shock induces consumer action.  Not necessarily for AT&T alone, but for the pay TV and mobile industry as a whole.

  • $200 is/was the “magical” price point for a consumer electronic item for a reason.  Anything that costs more than $200 is seen as an “ask your spouse first” level of purchase.  Below that its more discretionary.
  • My gut response to the ad was “wow, that is a really ugly monthly check to be writing.”  Rationally it might be cheaper than writing a $120 check to each company.  But a $200 check “weighs more” in the mind than two $120 ones…
  • As a kicker, the $200 price is only a 1 year promotion.  When that turns into a @$240 check at month 13, my guess is that becomes a “call a family meeting” sort of decision.  $2,880-$3,000 a year is real money with US median income at @$52,000 a year.

The problem with the $200 ad cuts deeper though.  It forces EVERYONE to confront the cost of both TV and mobile.  And bundling them under one name just makes it WORSE.  It prompts everyone to think about that total cost.  And worth through how much they could save by shaving that back.   To wit.

  • I switched my phone to a $35 a month plan from Cricket – AT&Ts prepaid brand.  I get the same coverage as AT&T (bad vs Verizon but adequate).  I pay half the cost as name-brand AT&T.  And the “pre paid” bill comes out of my credit card monthly without any work on my part.  It works great, although I might switch to Google’s Project Fi if/when they release a decent sized phone.
  • I don’t have a Cable TV cord to cut, but a lot of people do.  That ad’s ugly sticker price is going to prompt more people to take that plunge.   so just helped a friend subscribe to Netflix and cancel cable last week.  As a final irony, she was mostly watching Netflix’s “House of Cards” via Comcast pay-per-view basis anyway, so her Netflix subscription eliminated that additional cost/revenue stream.  

Good to be back blogging.  As always, the e-mail subscribe/unsubscribe function is on the site.  Just follow the attached link.  I am going to skew the mix more toward of macro and industry commentary, but reserve the right for to occasional personal musing.  Onward and upward!

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2 Responses to Cord-Cutting Catalyst? Will AT&T’s $200 Bundle Backfire?

  1. Jim Forster says:

    We’ll see. Both the cable guys and the satellite guys are doing a ‘content aggregator business model’. I think that model has legs, irrespective of whether a cable or dish is involved. Sure, the challengers will offer a la carte, but after a while people will start buying bundles again. Advantages are in reduced decision fatigue (“Do I want to spend 25c to watch this show?”, or “wow, another $3/month — I’m already subscribed to 10 sources”. Plus huge pricing advantages to bundles due to dealing with disparate willingness to pay. I’ll send you a paper..

  2. wskamman says:

    Not arguing with the value of the bundle per se, just the total dollar amount. It is just too “big.” That tips the cost over from the unconscious to the conscious. And that is usually a recipe for a cutback as the consumer figures out how much they are paying. The whole key to a subscription model is to stay below that conscious pain threshold.

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