Streaming Is Rebuilding Cable One Merger at a Time, and That’s Fine

Disney told investors on August 6 that it is “fully integrating Hulu into Disney+,”^{[1, p. 3]} with a single app for both due next year. One app is not one subscription: a Disney representative told Variety that customers will still be able to buy either service on its own.^[2] At the end of June, Hulu had 55.5 million paid subscribers and Disney+ 127.8 million worldwide.^[3] Streaming is rebuilding cable one merger at a time. It is tempting to call that a market failure. I read it as a correction. The fragmented era asked viewers to track which app had which show and to pay for each one separately, and it asked investors to cover the losses. Neither request could last.

The promise of more choice for less money was a fever dream, and losses paid for it. Media company after media company behaved as if it could be the next Netflix. Disney said in 2017 that it would end its Netflix deal for new releases and start its own service,^[4] and in 2019 NBCUniversal and WarnerMedia locked up “The Office”^[5] and “Friends”^[6] for theirs. Disney’s entertainment streaming business went from a $2.5 billion operating loss in fiscal 2023 to a $143 million operating profit in fiscal 2024.^[7] On a different measure, adjusted EBITDA, Comcast’s Peacock lost $101 million in the second quarter of this year, against $348 million a year earlier.^[8] Two companies’ results do not make a law, but for a service built on a broad catalog of mostly fixed-cost programming, I see scale as the only path to profit. The deals follow that logic. Disney paid Comcast about $9 billion for the last third of Hulu,^[2] and in January it agreed to combine Hulu + Live TV with Fubo and own 70% of the result.^[9] On October 21, Warner Bros. Discovery, which owns HBO Max, opened a review of its options after unsolicited interest from “multiple parties.”^{[10, para. 1]}

Viewers moved first. In May, streaming’s share of TV-set viewing in American homes, 44.8%, passed the combined share of broadcast and cable, 44.2%, for the first time in Nielsen’s^[11] monthly Gauge. Streaming has stayed ahead since, though football helped narrow the gap in September to 45.2% against 44.6%.^[12] The category is broad. It includes free ad-supported channels^[11] and YouTube, at 12.6% of all viewing in September,^[12] while live channels watched through Hulu + Live TV and other internet bundles count as broadcast or cable.^[13]

Share of TV-set viewing in U.S. homes by category, 2023 to 2025

The strongest case against the new bundle is the old case against cable. Bundles bury price increases inside the word “value,” and consolidation removes the rival who would undercut them. On October 21, Disney+ Premium rose from $15.99 to $18.99 a month, while a Premium bundle of Disney+ and Hulu stayed at $19.99.^[15] Read cynically, the standalone plan now survives as the bundle’s foil. Those costs are real. The economics still favor the bundle. In a model where copies cost the seller nothing, Yannis Bakos and Erik Brynjolfsson showed in 1999 that bundling many information goods can yield “greater sales, greater economic efficiency, and greater profits per good”^{[16, p. 1613]} than selling them separately, because a buyer’s value for a large bundle is far easier to predict than for any single title. In their model, as the bundle grows, the seller keeps the efficiency gain and buyers’ surplus per good shrinks toward zero. Viewers still get shows they would never have bought one at a time, and I would take that trade. Streaming also still costs less than cable: in Deloitte’s October 2024 survey, subscribers reported paying an average of $69 a month for four streaming services, against $125 for cable or satellite.^[17]

Canceling is the viewer’s check on the rebuilt bundle. In the same Deloitte survey, 39% of consumers said they had canceled at least one paid streaming service in the previous six months.^[17] In September, the month ABC suspended Jimmy Kimmel’s late-night show for six days and Disney announced price increases, the research firm Antenna estimated that Disney+’s monthly U.S. cancellation rate doubled from 4% in July and August to 8%, and Hulu’s from 5% to 10%.^[18] Sign-ups rose too, so the net change is unknown, and the released figures leave out Disney’s wholesale subscriptions and cannot tell a departure from a switch, upgrade or downgrade. Disney expects the single app to bring “lower churn.”^{[1, p. 3]} For viewers who choose the bundle, trimming it barely pays: dropping either service cuts the bill by $1 a month, with ads or without.^[15] A cancel button is no substitute for a rival, but it still caps what Disney can charge, provided Disney keeps selling each service on its own and canceling stays as easy as signing up. Keep both, and the rebuilt bundle remains an offer viewers can refuse.