YouTube TV Price Hike the Latest Sign Virtual MVPDs Are Backfiring
Virtual MVPDs were supposed to be a cheaper alternative to traditional cable TV packages. But it’s not panning out that way.
That’s the key takeaway following YouTube TV’s announcement of a new 12% price hike to $73 a month, with this the third service to announce an increase in 2023 after DirecTV Stream and some Sling TV packages carrying local ABC affiliates.
The average cost of a VMVPD package has increased by $13.46 (28%) from January 2021, now costing $62.33. This average is calculated from the cost to a new subscriber for available packages from DirecTV Stream, Frndly TV, FuboTV (currently rebranding to simply Fubo, with some high-profile marketing assists), Hulu With Live TV, Philo, Sling TV and YouTube TV.
The median average VMVPD package now costs $70, a 27% increase from the median of $55 seen in January 2021.
In essence this means that once the cost of internet service is factored in, the cost of many VMVPD services is now equal to that of cable bundled with broadband. While VMVPDs do offer improvements upon traditional TV by way of a better picture, modern EPG, zero charge for a cable box and in many cases free DVR, these may be marginal upgrades for those already with traditional service if there are few savings to be had.
Not all VMVPD services are on the expensive side. The likes of Philo (in which many cable TV networks have an investment stake) and Frndly TV do not offer broadcast networks and local or national sports networks, enabling them to keep costs low by only offering entertainment-based channels.
One could even make a case that Peacock is becoming the lowest-cost VMVPD by offering three Hallmark channels and Reelz for $5 a month. Sling TV has maintained its original value offering of lower cost bundles of networks (or all networks for a greater price).
In YouTube TV's case, they fought against increasing costs for as long as possible, with the prior increase to $65 occurring in June 2020. But with the service offering access to networks paying ever-exorbitant amounts for sports content, these costs are being passed along to all subscribers, regardless of whether they watch sports or not.
The number of VMVPD packages offered to consumers has fallen from the peak of 24 last seen in April 2021 to 16 (-33%). This reflects both the entry and exit of companies like Sony PlayStation — part of the original wave of VMVPDs — and T-Mobile's TVision service and the decreasing number of packages that some providers now offer new subscribers.
It is difficult to accurately assess the size of the domestic VMVPD market because only three of the seven operators report subscriber counts quarterly. What has been clear is that the industry has been growing at the same time traditional MVPDs have been declining (link to last cord-cutting update), strongly suggesting that many have been trading in one TV provider for another. With costs increasing, that may change.
The rising prices may also push some to create their own bundles comprising of a low-cost VMVPD service and a way of receiving network TV for free. Should the promise of ATSC 3.0 ever be realized, with its 4K signal allowing for free high-quality sports, that may tilt things given that 15% of US HHs are OTA only and another 13% use antennas in conjunction with other viewing methods.
The price increases are unlikely to see many cut VMVPD service initially, as the industry has weathered many such increases before. It will, however, likely slow down adoption and growth. As Alphabet reports on YouTube TV subscribers on an extremely sporadic basis, there will be no way to judge the impact of the increase (yet another notch against streaming's lack of transparency around user metrics).
The tipping point of major VMPDs costing the same as MVPD service is fast approaching. With MVPDs now offering steep sign-up discounts to lower the sticker price of service, a shift in consumer attitudes is increasingly likely.
