New data from TiVo this week shows how virtual MVPDs are starting to having a meaningful impact on the traditional pay TV business. The trouble for pay TV is that it can’t respond to price pressure because operators have painted themselves into a corner.
Chapter 1: Virtual MVPDs extend their influence (1:10)
There are lots of signs in the new TiVo Q4 2016 Video Trends Report that services like Sling TV, PS Vue, and DirecTV Now are starting to influence the pay TV market. The simplest is the fact that 7% of US consumers say they use the service. Another sign is the big increase in the number of people that say they are going to cut-the-cord.
As well, vMVPD costs set the price per channel delivered at below $1. When TiVo asked people how much they would pay for their Top 20 channels, the price they cited was 12% lower than in the previous quarter. Will thought this decline was due to SVOD pricing. I think it is a combination of the two services, though vMVPDs certainly seem to have accelerated the trend.
Chapter 2: Pay TV’s high cost makes it vulnerable (8:00)
Will thinks the relatively high cost of pay TV make virtual MVPD pricing an attention-grabber. He also thinks that SVOD is more impactful. He sees online video services chipping away at pay TV core values.
Chapter 3: Pay TV painted themselves into a corner (12:00)
I mentioned Will’s phrase about Pay TV operators painting themselves into corner. They are raising prices faster than inflation, but not faster than content providers are increasing license fees. So, their business is becoming much less profitable. And SVOD services, which a much cheaper than pay TV, are consuming meaningful amounts of consumer viewing, highlighting just how expensive pay TV is.
Chapter 4: Ad free originals big advantage for SVOD (16:00)
Will points out that SVOD investment in originals is really starting to pay off. He also points out that ad-free viewing is very attractive. I agreed with both these points.