You know how sometimes you start a relationship that seems so interesting and promising and exciting, opening new frontiers of experience and opportunity? And you know how sometimes, you’re wrong, and you know it really quickly?
That’s T-Mobile this week, which took only five months to kill off its puzzling T-Vision initiative and pivot to partnerships with Google’s YouTube TV and Philo for those carrier clients who want some skinny TV on top of their wireless service.
Subscribers who sign on to either Philo or YouTube TV will get discounts on those services for the bundle. YouTube TV will be T-Mobile’s “live TV solution.”
Of course, saying this plug-pulling took five months isn’t quite right. Cutting deals with both Philo and YouTube TV had to take at least, what, a few weeks? So, it was pretty clear, pretty quickly, that T-Mobile owning its own service was not working out, particularly after networks in its service squawked about violations in their traditional carriage arrangements and payments.
But given how fast the problems became clear, why did it even take four months to end thing? Or for that matter, why did it take any months? Who thought this was a good idea?
Wireless carriers, which generate many billions of dollars of reliable subscription revenue every month, have lots of history also owning their own content and content-aggregation operations. Much of that history is very bad indeed.
Just ask Verizon, which sank billions of dollars into online service Go90 (twice, actually, if you count the reboot that included hiring most of the tech team of failed subscription-video service Vessel). And don’t forget the very-late-in-the-game acquisitions of Internet 1.0- and 2.0-generation services such as Yahoo, AOL and Huffington Post. Ever since Hans Vestberg took over as CEO, Verizon has been de-emphasizing, shutting down or selling off pieces of those deals (Go90, Tumblr, HuffPo).
AT&T hasn’t fared much better, recently selling private-equity fund TPG a minority stake in DirecTV at a price that valued the satellite TV provider at less than a third of the original $49 billion purchase price in 2015. And now DirecTV doesn’t even have the NFL Sunday Ticket package, which was the main reason a whole lot of football fans (and bars) chose the service over Dish or cable.
The jury’s still out on whether AT&T made a good decision to buy what’s now WarnerMedia three years ago, for $85.4 billion.
The company is now hobbled with a mountain of debt, around $150 billion high, that’s forced the sale of several nice but non-core assets such as Crunchyroll.
But those haven’t been enough to fill the debt abyss,, and AT&T still faces the formidable capital expense of building out its 5G wireless network, while also making the expensive shows that will justify HBO Max’s sky-high subscription price.
So it’s safe to say there should have been warning signs for T-Mobile ahead of the T-Vision launch, but who ever pays attention to those when starting a sexy new relationship?
In some ways, though, T-Mobile may have been in the vanguard in killing off its skinny bundles as quickly as it did.
The puckish provocateurs at LightShed Partners this week included the multichannel bundle, including skinny bundles, among their “three losers” list of industries in danger if all the subscription streamers actually hit those ambitious subscriber targets they’ve been touting (tl;dr: if the SVOD services actually capture the 1.2 billion in subscribers they’re collectively projecting by 2025, no one’s watching cable anymore).
That has a lot of implications for media companies still significantly invested in legacy film and TV distribution and business models:
“If you use the multichannel bundle less and less… it’s hard to believe consumers will keep paying ever higher prices as MVPDs/vMVPDs are now simply passing along the rise in programming costs to subscribers,” LightShed’s post says. “Who keeps paying more and more for something they are not using nearly as much?”
As a result, the analysts cut their subscription forecasts for multichannel bundles dramatically. Cord-cutting already had eroded pay-TV penetration rates to levels not seen since the 1990s, somewhere in the high 70 millions. And with prices for skinny bundles no longer a bargain as programming costs keep getting passed along and live sports such as the NFL filter online, those virtual MVPDs won’t make much difference either.
Where previously LightShed was modeling cord-cutting would stabilize around 40 million to 50 million pay-TV/vMVPD U.S. households, now they project penetration rates might be half that.
Letting someone else deal with the challenging economics of running a vMVPD while still differentiating the T-Mobile wireless platform sure seems like a lot simpler and less expensive approach.
As T-Mobile CEO Mike Sievert put it in a blog post redolent with the flavor of crow: “This industry is incredibly fragmented, with new streaming services launching all the time, and we’ve concluded that we can add even more value to consumers’ TV choices by partnering with the best services out there, negotiating incredible streaming media deals for T-Mobile customers, and helping our customers navigate the increasingly complex streaming world.”
Sometimes, in online video as in life, it’s just better to be friends.