Sinclair Broadcasting Group CEO Chris Ripley offered a little more insight into plans to launch a direct-to-consumer version of its Bally Sports RSNs next year, adding that the offering will likely include a full slate of live games and be priced high enough as to not upset its MVPD partners.

Bally Sports has about 19 regional sports networks across the country. While the networks have struck carriage deals with most major traditional MVPDs, it has drawn some attention after streaming services YouTube TV and Hulu Plus Live TV dropped the channels last year. Dish Network dropped the RSNs in 2019.

Sinclair first said it would launch a direct-to-consumer version of the RSNs in 2021, but later extended that timeframe to mid-2022. At the JP Morgan Telecom, Media & Communications conference Tuesday, Ripley offered more insight into the plan.

Sinclair has long said while the RSNs have about 52 million subscribers, mainly through traditional MVPDs, that represents about 35 million unique households, or about half of the homes in the markets of the teams it represents. 

“That, plus the growing fandom of people outside the pay TV bundle, which our research points out to be quite significant, the demand for the direct-to-consumer offering is quite large,” Ripley said at the conference.

Also Read: Sinclair RSNs Face Tumultuous Period Analyst Says 

Ripley touched on the issue of pricing, which most analysts see as the key factor in the success or failure of a DTC offering. While the Sinclair CEO wouldn’t give specifics, he mentioned that it would be a “substantial difference” between what traditional MVPDs are currently paying and what consumers would pony up for the standalone channels. 

Sinclair is currently working out the details of the DTC offering, including the exact games, whether they would focus on monthly or annual pricing, all of which will be revealed closer to the launch date.   

Ripley said the industry is already moving toward a hybrid of linear and DTC distribution, and Sinclair is no different.

“The pay TV bundle has become a multi-platform, app-based experience across distributors, then you’ve got the direct-to-consumer experience which is natively app-based and modern in terms of the user experience,” Ripley said. “That hybrid environment is where we’re going to move to on both sides of our business over time. The key component on how we view the pay TV bundle and direct-to-consumer is really a pricing difference. There will be a substantial difference in prices of what the distributors buy on a wholesale basis versus what a retail customer would pay for a direct and unbundled offering.” 

Ripley wouldn’t get into pricing details, but said it would be high enough so as to protect the existing MVPD relationship.

Also Read: Bally Sports Networks Strike Out with Streamers on Opening Day 

“We will give pricing protection to the distributors to preserve the concept of wholesale pricing into bundled offerings versus retail pricing,” Ripley said. “There will be significant difference there in terms of what the value proposition is for distributors.”

Some analysts have predicted that a direct to consumer offering that included all of the games would have to be priced as high as $25 to $30 per month, more than four times what Sinclair charges monthly for its priciest RSN, Bally Sports Detroit, which costs distributors about $6.85 per subscriber, according to Kagan, a unit of S&P Global Market Intelligence. 

But according to sports consultant Lee Berke, president and CEO of LHB Sports, Entertainment & Media, even at that price point, Sinclair fails to address the main issue – attracting new subscribers to combat the shrinking pay TV universe for RSNs along with the loss of most vMVPD distribution.

Sinclair, like other RSNs, is faced with the unenviable task of trying to appease the segment that is generating most of its revenue -- MVPDs -- while attracting streaming subscribers who want to pay less. It’s not an easy situation, and it is particularly tricky for sports networks. While entertainment streamers like Disney Plus, Netflix, Amazon Prime and HBO Max can manage through enormous scale to charge between $10 and $15 per month for service, RSNs, which have high sports rights costs and live programming that is not always year-round, have to charge more just to break even. 

“The problem with that is, it’s not necessarily a consumer-focused strategy,” Berke said of a $25 to $30 price point. “If you please the distributors and yet the fans don’t purchase the service, then what have you done? As I see it, you haven't really solved anything. The problem isn't that the distributors are upset. That’s a symptom of what is going to happen by going direct-to-consumer. The problem is that the universe is shrinking.”   

For sports nets, the answer is in part by offering DTC customers more. Ripley said engagement with its authenticated apps is driven by games, but also by VOD and editorial content created by Sinclair. 

“It's not just about putting the games over the top, it’s about the platform you create around that,” Ripley said, adding that as the business moves more toward digital distribution, opportunities around ticketing, social media and gamification become more important. 

“If you think about where this is headed, there’s been a lot of talk in the video game industry about creating a metaverse around various game experiences,” Ripley continued. “This is no different. The winner here on direct-to-consumer sports will have a metaverse.” 

But the real game changer could be sports betting. Bally Corp., the gaming giant that purchased naming rights to the Sinclair RSNs last year, began beta testing its mobile sportsbook, Bally Bet, in Colorado earlier this month.  The company expects to launch the service in three additional markets this year and in other areas in 2022. 

Ripley said the  opportunity around sports betting is huge, adding that the company is working on a “Watch and Play” experience that would allow viewers to bet on games while they’re watching them. Ripley called gamification the third major prong of sports rights monetization and would eclipse advertising revenue, and maybe even subscription fees, once it hits its stride. 

Also Read: Sinclair RSNs: Timing is Everything

Ripley added that early versions of a “gamified experience” could surface next year, while the overlay of sports betting would depend on which states allow it.

“In four or five years you’re gonna be in many, many markets where you can have a real time gamified experience while you watch, play the game within the game,” Ripley said. “When that becomes widespread, that’s when the real economic opportunity becomes quite significant.”

Hulu + Live TV now has 3.2 million subscribers, according to figures released Tuesday by the Walt Disney Company.

Barring a disclosure of huge growth for Sling TV when parent company Dish Network reports its fourth-quarter earnings later this month, Hulu Live is now the biggest virtual MVPD on the market. 

Sling TV, which debuted in early 2015 as the first vMVPD and has led the market since that time in subscribers, reported 2.686 million users as of the end of the third quarter. 

Alphabet reported Tuesday that its vMVPD, YouTube TV, has surpassed 2 million, which would ostensibly rank it in the No. 3 position. 

Related: Disney+ Jumps to 28.6M Subscribers, Exceeding Expectations

For Hulu and Disney, the virtual pay TV number was only one impressive figure for an overall OTT portfolio, all of which are riding the momentum of new red-hot SVOD service Disney+.

That $6.99 service, which debuted in North America on November 12, now has 28.6 million paid users, Disney told investors, coming in on the high side of analysts’ projections. 

Hulu’s portfolio of services are being bundled with Disney+, and they’re riding the wave. Overall Hulu subscribers reached 30.4 million during the quarter, Disney said.

Up until last year, Hulu was a joint venture between Disney, Fox, Comcast/NBCUniversal and the erstwhile Time Warner Inc. With Disney now fully in control of the service, the conglomerate last week announced it is pulling the service into its direct-to-consumer group. Hulu CEO Randy Freer, meanwhile, is exiting the company. 

With Comcast, AT&T, Charter Communications and Verizon each reporting significant video losses in the fourth quarter, the U.S. linear pay TV business has lost nearly 1.5 million customers before Dish Network and Altice USA have reported their earnings. 

MoffettNathanson analyst Michael Nathanson projects that overall pay TV recession will hit a record -6.8%, but will be offset by an “exceptionally strong” growth quarter for virtual MVPDs Hulu Live TV and YouTube.

In his note to shareholders this morning, titled “U.S. Media: Get Those Life Boats Ready,” Nathanson said he didn’t have accurate data enough data to detail precisely how well the vMVPD sector did in Q4. But by all accounts, Hulu Live TV and YouTube TV “crushed it” during the quarter. 

For its part, AT&T lost 907,000 users across DirecTV satellite, U-verse IPTV and AT&T Now vMVPD services. Wireless rival Verizon reported a loss of 58,000 Fios TV users. And in cable, Comcast said it lost 151,000 pay TV users, while Charter said it shedded 40,000.

The total attrition fo 1.467 million was about 311,000 more than MoffettNathanson had forecasted going into Q4 earnings reports.

Hulu announced that it is raising the price of its Hulu+Live TV service by $10 to $54.99 a month for its base service.

The price increase will affect all plans that include live TV.

The move comes as analysts note that the growth of subscribers to virtual multichannel video programming distributors has slowed, even as cord cutting increases. 

Last month Sony said it would be closing its Sony PlayStation Vue vMVPD and other services, including AT&T TV Now have increased their prices in order to improve profitability.

“The new price better reflects the substantial value of Hulu+Live TV together as the only offering that brings together live and on-demand television in one seamless experience,” Hulu said. “The new price will allow us to continue offering all of the popular live news, sports and entertainment programming including in the plan.

Hulu has been aggressively promoting its live service as a way streaming viewers can watch live sports events.

In its blog post, Hulu noted that it is relatively easy for subscribers to switch from the live plan to the lower-cost on-demand only service after the football season ends.

“We realize many Hulu customers want even more choice and control over their live viewing experience, so we’re actively exploring ways to provide additional, more tailored live TV options to you in the future. We’ll keep you posted on those efforts as they progress,” the Hulu blog post said.

The Walt Disney Co. this year acquired control of Hulu from partners Comcast, Fox and AT&T. Disney is offering Hulu’s ad-supported on-demand service in a bundle with the recently launched Disney+ and ESPN+ streaming services for $12.99 a month. Hulu's on-demand service costs $5.99 a month.

Start-up virtual pay TV provider fuboTV said it has added eight more local affiliate stations, putting the total number of CBS, Fox, NBC, CW and Telemundo locals under contract at 486.

This total ranks the start-up third among vMVPDs, according to recent data published by CNET and others. Hulu with Live TV ranks first, with more than 600 local stations under contract, followed by YouTube TV with more than 500. The tallies put DirecTV Now at around 360 locals, and in fourth place. 

Notably, fuboTV has yet to sign a licensing deal with The Walt Disney Company, so ABC stations don’t factor into its mix.

Related: fuboTV Raises $75M More

With the addition fo WAKA-TV in Montgomery, Alabama; KZTV-TV in Corpus Christie, Texas; WKBT-TV in La Crosse-Eau Claire, Wisconsin; and WCBI-TV in Columbus, Georgia, fuboTV has local coverage of CBS in 71% of the country.

With WSFA-TV in Montgomery, KRIS-TV in Corpus Christi and WEAI-TV in La Crosse-Eau Claire, coverage for NBC is up to 76%.

And with WLAX-TV in La Crosse-Eau Claire in the fold, coverage of Fox is at 93%.

With vMVPDs carrying many of the same channels, it's retrans deals with local stations that provide an edge in any given market.

Meanwhile, fuboTV also announced the addition of RAI Italia as a $7.99-a-month add-on, giving its subscribers access to Series A soccer matches. 

While PlayStation Vue, one of the first two virtual MVPDs to enter the market, appears to have stagnated in subscriber growth, and has suffered some major programming defections, Sony seemingly remains committed to the product.

Case in point: The company has announced the addition of 200 local ABC, FOX and NBC affiliates, bringing its total bundle of local broadcast stations under retransmission agreement to around 450. (Sony has a list of its available locals here.)

Users in the relevant markets will now be able to live-stream local network affiliates rather than just receiving on-demand prime-time programming from the major broadcast networks tied to these stations. (Notably, according to Cord Cutter News, users won't have DVR access to these channels.)

Related: Sony Boosts Vue with PlayStation Cloud Remote, Sign-up Promotion

Carving out affiliate deals is an tedious, time-consuming expensive process. But both YouTube TV and Hulu with Live TV—which came into the vMVPD market two years after PlayStation Vue—have had audience-growth success with an aggressive strategy of adding local stations.

These services haven’t publicly released their subscriber numbers. But according to Strategy Analytics estimates released last week, Vue has around 745,000 users compared to around 955,000 for Hulu Live, even though the former has been in the market far longer.

Related: Sony PlayStation Vue Launches ESPN College Extra

Vue also announced the addition of ESPN College Extra. And earlier in August, Sony debuted a new PlayStation 4 controller more adept at TV watching that video game play.

For Sony, these are important indicators that it remains firmly behind its three-year-old vMVPD, which lost 24 affiliate tie-ups in 23 markets in May when it didn’t renew its retrans deal with Sinclair Broadcast Group. Sony also let its carriage deal with Viacom lapse last year.

While not yet very profitable for any of the more than half-dozen major participants involved, virtual pay TV services continue to add customers. But the market is crowded with services priced at around $40 a month and offering basically the same channels. For users, the decision as to which service to choose often comes down to which platform has the right combination of local channels and regional sports networks in their individual market. 

In May, Sony’s CEO Kenichiro Yoshida told reporters that Sony has no plans to shut down PS Vue, as it is bringing in useful user data.

Streaming of virtual MPVD services accounted for about 10% of all OTT usage in the U.S. in April, according to a new report from comScore.

This represents a 53% increase year over year in vMVPD usage, the research company noted.

With operators including AT&T reporting swift growth of vMVPD services—the company’s DirecTV Now platform added 342,000 customers in the second quarter, for instance—the total U.S. vMVPD customer base grew 58% year over year to 4.99 million as of April, comScore added.

Related: DirecTV Now Pacing to Surpass Sling TV in Subscribers by End of Year

Notably, streaming pay TV services seem to be a competitive threat to Netflix, Hulu and other non-live OTT services. According to comScore, among households that have adopted OTT, nearly half of time spent on OTT services is devoted to vMVPDs.

ComScore also said that households with a vMVPD service spent, on average, 128 hours a month streaming OTT content,

Virtual MVPD households also tend to subscribe to more OTT services—an average of 6.1 services vs. the 3.8 for OTT households that don’t have a vMVPD subscription.

Susan Engleson, senior director of emerging products for comScore, predicted that vMVPD subscribers will reach 7 million by the end of 2018.

“Given the competitive price points and low barriers to entry for consumers (no installation required), I anticipate that we will continue to see significant growth in virtual MVPDs in the years to come,” she said. “Both Hulu and YouTube launched their services in 2017, so they are still in their infancy and have significant growth potential. In fact, it’s likely both services will well exceed one million users each this year.”