The way Americans buy cable TV is poised for a big change, according to Verizon CEO Lowell McAdam: The 300-channel bundles standard among many TV providers will be phased out over the next three to five years, and replaced by smaller, more customizable packages.
“People do not want 300-channel bundles and the economics won’t work for that,” said McAdam at Business Insider’s Ignition conference today (Dec. 8).
In April, Verizon FIOS began offering slimmed-down bundles to reach consumers who didn’t want to pay for costly packages loaded with channels they don’t watch. The custom TV packages average between 40 and 60 channels and now account for 40% of Verizon FIOS’ subscriber volume, McAdam said.
“[Our custom TV] doesn’t have all the heavy weight of these sports channels that you pay for whether you watch or not,” said McAdam. “‘Skinnying’ down the bundle helps the profitability.”
McAdam also expects mobile to become a larger focus for providers as cable bundles slim down. Verizon recently launched Go90, a short-form mobile video streaming platform. Competitor AT&T is working on a competing streaming service and Comcast has a platform of its own aimed at cord cutters.
While cable TV is a large part of Verizon’s business, it’s by no means the largest share. That distinction goes to Verizon’s wireless business, which brought in $87.6 billion in revenue in 2014, according to an annual report. Broadband services are also big revenue generators.
McAdam said Verizon invests about $18 billion a year in its wireless network, improving connectivity and adding services like 5G, which Verizon is slated to begin testing next year.