YouTube TV, FuboTV Weaken the Case for vMVPDs

                                    Death of VMVPDs
                                    Cheyne Gateley.VIP

                                    The circle of virtual MVPD life: Add channels, raise prices, and pray for forgiveness. 

                                    This time around, YouTube TV and FuboTV are the vMVPD perpetrators in question. Both since yesterday have confirmed what many chalked up as inevitable after reports of new carriage deals broke in previous weeks. 

                                    YouTube TV yesterday announced that it raised its price by 30% (from $50 per month) to $65 per month, which will help it cover the cost of the 14 ViacomCBS nets coming its way. FuboTV announced earlier today that all of its packages would go up by $5 per month as new Disney nets like ESPN hit its service.

                                    Even though many saw this coming, foresight probably only barely lessens the sting of price hikes for those who counted on YouTube TV or FuboTV for a compellingly cheaper linear TV-like experience. And that group could be substantial: 44% of U.S. consumers with a vMVPD switched directly from a traditional pay-TV service, a February survey by Leichtman Research Group found. 

                                    Even though YouTube TV offers some things Fubo doesn’t, like unlimited DVR storage space, Google may lose more vMVPD subs as a result of its price hike (which is equivalent to a monthly HBO Max subscription). 

                                    In a 2019 survey by L.E.K. Consulting, 45% of respondents said they would cancel their vMVPD service if the monthly price rose by $10. This dropped to 15% for a $5 monthly price hike.

                                    Both companies likely sense some attrition will come because of the new higher prices. YouTube TV linked to where users could cancel subscriptions in its blog post, only a few paragraphs down from where it mentioned the price hike. Fubo indirectly justified its price hike on a new post by saying the higher prices help the company offer new channels and premium features like live sports in 4K.

                                    Sure, YouTube TV and FuboTV may not completely crash and burn because of this. YouTube TV had an estimated 1.6 million subs in November 2019 (months following when it last raised prices), up from about 800,000 in the same period one year prior, for example. 

                                    But the price hike and bloating of its bundle still weakens the case for making a MVPD-to-vMVPD defection, which had already been weakening in prior years from a sheer cost savings perspective. In 2019, the average monthly price of a vMVPD was $55, compared to the average $96 monthly cost of linear TV, per MoffettNathanson. These figures were respectively $30 (vMVPD) and $90 (MVPD) in 2016.  

                                    That’s unfortunate for the vMVPD community, who’ve already fallen on tough luck in recent months amid bloating bundles and rising prices. VIP estimated that leading vMVPDs lost 900,000 subscribers (a figure inflated by the PlayStation Vue shutdown) from Q4 ‘19 to Q1 ‘20, for example. 

                                    And a dramatic shift in luck doesn’t seem too near given vMVPDs are still trying to grow by bloating as the pandemic ravages the economy. 

                                    Add on the fact that the pandemic has sidelined most major sporting events and the monetization prospects for vMVPDs look a bit bleaker. U.S. ad revenue fell 31% in May as the U.S. only held a handful of major sports events due to coronavirus and most major ad categories cut their ad spend by 10% or more, according to Standard Media Index. 

                                    Fubo acknowledged the COVID-19-sports drought and warned investors against high expectations in a letter to shareholders in May: “Although we continue to offer our services, without live sports, there is no assurance we will continue to maintain our subscriber base or continue to receive advertising dollars.”

                                    We expect consumers to vote with their dollars accordingly. Q2 just came to a close, and VIP estimates vMVPD losses could stack up by 500,000 for the quarter.

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