Launched just over five years ago with the introduction of Dish network’s Sling TV, the virtual MVPD business has matured quickly, evidenced last week by Google’s decision to up YouTube TV’s price point to the very traditional pay TV-like level of $65 a month.
In a blog post to its investor clients, research company LightShed Partners took a deep dive into the state of the vMVPD business, which it said now accounts for around 9.3 million U.S. subscribers, or about 11% of the overall U.S. pay TV base of 82 million customers.
Here are five notable takeaways:
> Rather than becoming a niche product marketed to customers that don’t want two-year contracts or other traditional pay TV trappings, LightShed thinks AT&T will simply get rid of AT&T TV Now.
“As programming prices have gone up, Sony Vue exited the business in early 2020 and AT&T TV Now appears on its way toward exiting as their sub base dwindles,” a triumvirate of LightShed analysts—Richard Greenfield, Brandon Ross and Mark Kelley—write.
> Even after its $15 price spike, YouTube TV is still a bargain relative to traditional pay TV.
“Even $65 for YouTube is far cheaper than off-promo pricing from any MVPD (cable or satellite), when you factor in no box fees, unlimited cloud DVR, no broadcast TV or regional sports network surcharges, taxes, etc, not to mention superior user interfaces’ however, the price differential has been cut in half as more and more channels have been stuffed in,” LightShed said.
> Expect Hulu to raise its vMVPD prices soon.
“While Hulu Live has yet to raise price in 2020 (expect it soon), its pricing is up 37% since launch, having started $5 more expensive than YouTube TV (if Hulu Live goes to $65, its pricing would be up 63% since launch),” the firm noted.
> Hulu with Live TV was created with the intention of bolstering the program licensing market, not so much becoming a directly profitable business.
“Broadcast and cable network executives loved the idea of vMPVDs, as they offered new competitors to cable and satellite that would pay premium rates for broadcast networks and cable networks…, LightShed writes. “In fact, Hulu’s former joint owners Disney/Fox/NBC forced Hulu to launch a vMVPD so that they could drive subscribers and subscription revenues in their wholly-owned businesses, while Hulu booked off-balance sheet losses…”
> The vMVPD business has stopped growing.
“After four years of amazing growth, the vMVPD category lost subscribers for the first time in Q1 2020 and will likely lose subscribers again in Q2 2020, primarily due to the lack of sports programming,” the report added.
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