Following Sony’s decision earlier this week to shutter its 5-year-old virtual MVPD, PlayStation Vue, we can expect more closures and/or consolidation in the vMVPD business, claims Cowen analyst Gregory Williams.
“Despite the cord cutting acceleration, vMVPDs have seen a significant net add deceleration, struggling to compete in the crowded OTT market against each other and the more than 300 direct-to-consumer apps,” Williams wrote in a note to investors today. “Our work suggests the slowdown is driven largely by price as vMVPD’s are sub-scale and playing in a generally irrational and unsustainable market. To that point, with the continued rise in programming costs, vMVPD economics continue to get tougher.”
If vMVPD pricing rises to a level of parity with traditional pay TV services, consumers will opt for direct-to consumer and VOD services, or not cut the cord at all, Willams said.
Currently, there are six remaining “large” vMVPDs in the market—Hulu Live TV, YouTube TV, Sling TV, AT&T TV Now, Philo and fuboTV.
“With the vMVPD market becoming more rationalized and subsequently less appealing, longer term, we eventually see market exits (or consolidation) to three to five vMVPD’s,” Williams added.
As for why Vue was the first major vMVPD to succumb, an executive for a rival vMVPD suggested the platform’s costs were simply too high. Not only was Sony paying broadcast retransmission fees to include local stations in every market Vue operated in, the company also licensed a comprehensive set of regional sports networks.
On top of programming, operational costs probably weren’t inexpensive for Sony, the executive added, noting that Vue purchased its streaming technology from Disney-owned BAMTech, a fairly elite third-party vendor.
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