Cheaper viewing packages to charm 'cord-cutters'

Two of the nation's largest pay-TV operators, Comcast Corp. and Verizon Communications Inc., are marketing slimmed-down, low-cost TV bundles to young adults who might only be interested in Internet-delivered entertainment - the so-called cord-cutters.

The double-play product offerings, or Internet and TV services, are part of the ferment in the pay-TV industry as YouTube, Netflix, and other Internet-delivered entertainment gain footholds with Internet-savvy millennials.

Premium-network HBO and broadcast network CBS Corp. recently announced plans to offer their shows directly to consumers over the Internet - over-the-top, fee-based products that could threaten or cannibalize pay-TV distributors.

People who purchase just the Internet and not a pay-TV service are called cord-cutters. The number of cord-cutters is expected to more than double to 16 million TV households in 2018 from 6.5 million households this year, according to research firm Magna Global.

But Comcast and Verizon say they can stay relevant by offering stripped-down TV packages to Internet-leaning millennials, or young adults in their 20s, and then broaden their TV relationships with them when they are in their 30s and 40s.

They also say this package of Internet and a smaller TV bundle will be less expensive than a consumer's purchasing an Internet service and then individually adding services such as CBS and HBO.

Verizon recently launched a new package as part of its FiOS Quantum Internet Service. The new bundle includes broadband service, local TV stations, HBO or Showtime, and a free year of Netflix for $59.99 a month, plus taxes and fees. The Internet speed is 50 megabits.

"What we saw was a need for people who valued the Internet and wanted some TV but did not value the entire video proposition," John Harrobin, chief marketing officer for Verizon's wireline and consumer mass business unit, said in a recent interview.

A typical pay-TV package could cost $80 a month by itself.

Harrobin said that subscribers for the new double-play bundle skew toward young adults, and those living in apartments and condos in cities. "What we have seen is that this is not our main seller, but we are seeing some success with it," he said.

Harrobin and other industry experts say the classic cable-TV package may be a "life-stage product" and that millennials will purchase it as they grow older.

Comcast offers two products of "skinny bundles" aimed at younger adults - University Xfinity on Campus and Internet Plus.

Matt Strauss, senior vice president and general manager of Comcast video services, said the idea was to grab college students and younger adults and expose them to the TV ecosystem. Those young adults now are "high-speed data customers first and video second," Strauss said.

The Xfinity on Campus is included with room and board on selected colleges, including Drexel University, in Comcast's cable territory. This enables college students to watch streamed TV on laptops, tablets, and mobile phones.

Internet Plus, a double-play product, costs $44.99 a month and comes with the Internet, HBO and Streampix, and 10 TV channels. The Internet speed is 25 megabits per second.

The question, said Strauss, is "how do we build relationships with these [customer] segments earlier?"