VMVPDs Growing, but Face Challenges of Pay TV, Parks Event Told

Virtual MVPD subscribership by 2023 will be higher than that of telco and satellite pay TV combined, behind cable TV, said Parks Associates analyst Paul Erickson on a Wednesday webcast. By 2024, vMVPD will have 30% of pay-TV subscriptions vs. 16% for telcos and 16% satellite, he said.

But vMVPDs face some of the same challenges as traditional pay-TV services, including rising content costs that are forcing them to raise prices, Erickson said. Launch price for Sling TV in 2015 was $20 per month, growing 75% to $35 now. YouTubeTV hiked prices 86% since launch to $65, mirrored by fuboTV, and Hulu + Live TV is also $65 monthly, after launching at $40.

It’s a crowded and competitive space, said Erickson, saying vMVPDs are riding the popularity of over-the-top video services but need unique propositions to separate their services from the growing number of rivals. Sling benefited from its longtime track record plus international content, though it doesn’t offer local channels, while YouTubeTV and Hulu+ Live TV have the Google and Disney ecosystems behind them, he noted. Newcomers challenged to find their differentiators include Vidgo, Philo and Frndly TV.

Churn is a major challenge for vMVPDs, which don’t have customer contracts, said Erickson: Subscription duration averaged a year to 15 months for Sling (16 months), AT&T Now (15), YouTubeTV (15), Hulu + Live TV (14), AT&T WatchTV (12) and T-Mobile TVision Home (8). Overall OTT churn rate is 38%; it’s 49% for vMVPDs. Since Parks' survey, AT&T announced it's spinning off its video TV services (see 2103010046), and T-Mobile shut down its TVision OTT service this week, six months after launch, choosing to partner with Google and make YouTubeTV its preferred live TV offering.

Over half of customers in a Parks survey who switched from pay TV to a vMVPD gave price as the top reason, while 29% of current pay-TV customers are unhappy with the price they pay for service, Erickson said. U.S. broadband households paid an average $16 a month for OTT services early last year, double that of 2018. With OTT services continuing to grow, vMVPDs are uniquely positioned to step into the opportunity created by defections from pay TV, said Erickson.

On reasons for cutting OTT services, consumers in a Parks survey said they needed to cut back on household expenses; they finished watching a show they liked; a promotional rate ended; they couldn’t find good programs to watch; and the service raised its price, said Erickson.

Ways OTT services have tried to stem churn include putting a subscription on hold; holding to the original subscription price; offering a free upgrade to a higher tier; having better customer support; and giving a $1 monthly discount, Erickson said.