For a while now, I’ve been banging on about how the future of linear TV is going to be digital, that eventually all live TV will be delivered via broadband and that the winners will be those services that look less like the traditional TV services everyone hates, and so elegant, library-based interfaces, simple pricing plans and minimal contact with call center employees are all going to be huge wins.
The stars on this seem to be in alignment this month, as a few trends have come to light.
1. vMVPDs are booming
While Sling and DirecTV Now have both taken hits as of late, YouTube TV and Hulu Live TV are both booming, with Bloomberg estimating that Hulu now has 2 million subscribers and YouTube 1 million, bringing the overall vMVPD total to around 10 million of the estimated 85 million pay TV households.
That’s a huge boost for both services which feature the sorts of elegant interfaces and simple pricing plans discussed above.
2. DirecTV Now and Direct TV are getting pushback for their mobile-phone-esque new pricing plans
Both DTVN (the vMVPD) and DTV (the MVPD) got hammered hard in Q4. So AT&T seems to have decided that introducing multilevel pricing plans was the way to remedy that, removing some popular networks (Discovery, Viacom) from some plans and making other plans into 100+ channel “ectomorph bundles” all of which mostly works to blur the lines between the two services. (Said lines already being made blurry by the planned migration of DTV’s customers to OTT delivery and the introduction of an available-online-only Android based set top box for DTV.)
Actual details are not as important as the fact that AT&T got a whole lot of bad press and consumer pushback on the socials for this and they are in danger of coming off as the clueless phone company playing in the TV sandbox, a look they definitely don’t want. (And then there were those unfortunate emails AT&T sent out that confused their Watch product and Direct TV.)
3. MoffettNathanson is pushing MVPDs to drop pay TV
Pushing may be too strong a word, but Craig Moffett is definitely suggesting that the amount of money companies like Charter need to spend to create viable pay TV plans may not be worth the hassle or lack of ROI.
This is something we’ve talked about in regards to smaller MVPDs—that partnering with a vMVPD is likely a better deal for them than trying to cobble together their own pay TV platform. Freed from that pressure, they can offer customers several vMVPD options that can be bundled together with broadband and since the cost of maintaining a Hulu Live TV or YouTube TV does not come out of their bottom line, it’s a win all around.
We’ve been surprised that the larger MVPDs have not launched their own vMVPDs, Comcast in particular since X1 has generally been well-received. Our assumption is that it’s a combination of the difficulty of obtaining streaming rights coupled with fear that they’d be cannibalizing their own user base.
But given that said user base is already defecting to Hulu and YouTube, it would seem to make sense for them to do something to keep those customers inside their ecosystems, especially as it seems that traditional cable bundles are about to go the way of the dinosaur.
Circling back to Craig Moffett’s advice though, the MVPDs, which once had a monopoly on broadband are soon going to find themselves with at least three new competitors thanks to 5G (AT&T, Verizon and T-Mobile.) And since Verizon has been pretty open about the fact that they just want to strike deals with vMVPDs (they already have one with YouTube) we’re betting that their FIOS+vMVPD bundle is going to look very attractive to consumers compared to all the old school set top based bundles.
While “mesomorph” bundles of 80+ channels have been quickly replacing “skinny” bundles in vMVPDland, the next trend may be towards SuperSkinny bundles—just the broadcast networks with RSNs and some popular cable channels available as add-ons.
As the Flixcopalpse happens, and new services from Disney, NBCU, Apple and Warner double the size of the subscription OTT market, consumers who have subscriptions to multiple services are going to look to cut back the price and the breadth of their other pay TV subscriptions. So getting bundles to be as thin as possible is going to be a good move in this market.
That’s good news for the broadcast networks and for networks like HGTV and Lifetime that have strong brand images and passionate audiences, but bad news for networks whose offerings and brand images are fuzzy, as they’re going to need to give viewers a reason to keep on paying for them and “they’re part of the Silver Plus bundle” just isn’t going to cut it anymore.
Watch for all this to play out over the next two to four years—nothing in TV every happens quickly—but right now, it’s all seeming rather inevitable.