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Virtual Pay TV Hit the Hard Times in Q1

Money Going Down the Drain
(Image credit: Inside Self Storage)

In the dog house with media tech equity analysts almost from the beginning, the low-margin business of live-streaming bundles of expensive-to-license linear pay TV channels may be officially out of kibble. 

Not to wear out the ol’ canine metaphors here too much, but the first quarter was, well, ruff! for virtual MVPD operators. Most saw their customer bases further erode. And nobody but nobody seems to be making any bones from doing this. 

The biggest vMVPD operator, Hulu + Live TV, reported the loss of 200,000 subscribers in the first quarter, finishing with around 3.8 million subscribers—about 500,000 more than it had after the first three months of 2020. Considering how fast that platform shot up to 3 million users, however, that’s a noticeable deceleration. 

Controlling company Disney can buy the outstanding 33% stake in Hulu from Comcast in 2024. The base price will be $27.5 billion, but Disney will have to pay a greater “fair market” price if Hulu continues to shoot up in value. So it’s questionable as to whether Disney is interested in promotions that drive the Hulu + Live TV subscriber base right now. 

Google, meanwhile, didn’t reveal a first-quarter subscriber growth number for the second largest vMVPD, YouTube TV. But research company MScience estimated its first quarter customer expansion to only be around 5,000 users. That's probably around how many MIT-trained engineers are in Google's break room right now. 

Any likely operating loss being incurred by YouTube TV is undoubtedly buried within the vast Alphabet balance sheet. But it’s not an inconsequential business, given that YouTube TV is awkwardly positioned in the middle of Google’s ongoing dispute with Roku right now. Anything that disrupts distribution on the top OTT platform can’t be good for a still nascent streaming business that’s already not growing too fast.

And speaking of not growing so fast, Dish Network’s Sling TV lost 100,000 customers in the first quarter. The very first vMVPD in the market back in February 2015, the platform now has only 2.374 million users, about a 174,000 more than it had three years ago. 

An aggressive two-months-free promotion for new and existing Verizon customers, announced just this past week, should help Q2 performance. But Dish Chairman Charlie Ergen wasn’t kidding around when he said his company “stumbled” with Sling TV, squandering first-to-market momentum with what has been a cruddy app and inadequate overall live streaming tech platform. 

For its part, New York startup turned SPAC-enabled IPO, fuboTV, is the fastest growing vMVPD right now, adding 43,000 customers in Q1, and finishing the period with over 590,400 customers—that’s more than double what it had at this time last year. 

But as fuboTV tries to integrate pricey sports betting acquisitions and turn itself into something more than a low-margin vMPVD, the losses are mounting—the company reported an operating loss of more than $70 million for Q1. Some in the investment community—notably, analyst Richard Greenfield—are aggressively skeptical about fuboTV. 

And if you were one of those folks who speculatively put around $1,000 worth of your 401K or IRA into FUBO back in February, just to see what would happen? … Let’s just say you’re down over $600 today. 

Drilling further, AT&T—right before it spun off its pay TV assets and sold a piece of that spinoff to private equity firm TPG—rolled its vMVPD, AT&T TV Now, into its IP-based premium pay TV service, AT&T TV.

There’s a no-contract iteration of AT&T TV, which AT&T reps insist is, in fact, a virtual MVPD. You can sign up for this service and quit it immediately, with no contracts are proprietary CPE required. But there’s no flat rate price for AT&T TV, since taxes and fees are involved. In our view, AT&T TV is still too rooted in old-world pay TV economics—starting with the heavy $69.99 list price—to qualify as a vMVPD on our list. 

Meanwhile, T-Mobile’s TVision ankled the market, six months after it came in—the victim of an egregiously stupid miscalculation of the flexibility the wireless company had to tier channels within the confines of its program licensing contracts. 

Finally, startup Philo—perhaps the only remaining true “skinny” bundle—has been lauded for maintaining sustainability. The San Francisco company, which bundles over 60 entertainment channels, no news or sports, for $20 a month reported back in March that it had 800,000 paying subscribers, a 300% year-over-year pandemic-era uptick. 

We don’t know how good or how bad Q1 was to Philo, but it likely didn’t change the downward trajectory of the moribund vMPVD business, regardless.