Jessica Reif Cohen, a media analyst at Bank of America Merrill Lynch, is not a big believer in vMVPDs such as Sling TV and DirecTV Now. Speaking at NAB New York last week she described them as “one big yawn.”[i] She sees them as adding complexity to the market which in the end could bring people back to the simplicity of pay TV bundle, which she sees as a superior distribution model.
In some ways, Ms. Reif Cohen is right. vMVPDs are not a direct threat to pay television. If traditional television is what you want, pay television is still the best way to get it. The trouble is, for an increasing number of people, traditional television in the way pay TV distributes it is not what they want.
78% of U.S. consumers want to pick the channels in their pay TV bundle.[ii] They cannot do this with current pay TV big bundles. You can argue that vMVPDs do not provide this either, but they are smaller, more flexible bundles get consumers considerably closer to full a la carte.
vMVPDs fulfill different role to traditional pay TV
Traditional pay TV has tried to deliver all the TV entertainment their customers need. Increasingly they are failing to fulfill that role. Ericsson says that the percentage of people that agree with the statement “my pay TV provider gives me everything I need” has fallen dramatically. In 2016, 35% agreed with the statement, and in 2017 just 26% agreed.[iii]
vMVPDs are treading a different path. The services do not seek to provide everything a customer could want to watch on TV. Rather, executives recognize their services are part of consumer’s broader entertainment package. This package includes Netflix, Amazon, and many others. The former head of Sling TV, Roger Lynch, put it very succinctly:
“Sling TV is trying to be a piece of the puzzle. They <subscribers> will put together their bundle. Sling TV will be the live part of that.”
vMVPDs more targeted than pay TV
Pay TV has always sort to be appealing to the general population. For many years this approach worked because it was the only way to get mainstream television entertainment. vMVPDs are becoming more custom, targeting smaller niches rather than the general population.
In an analysis of the channel bundles provided by vMVPDs, TiVo found that each fit a slightly different demographic group.[iv] For example, PlayStation Vue favors consumers interested in Lifestyle and Travel programming, DirecTV Now favors kids programming.
FuboTV is the vMVPD service for sports lovers. It has most of the major sports TV channels and many of the minor ones, including RSNs (regional sports networks.) FuboTV continues to polish its sports credentials. It has just signed a sponsorship deal with the LA Kings.[v] Under the deal, fuboTV is the presenting sponsor of the team’s online schedule. A button is included on the page which directly launches fuboTV so the user can immediately watch the game.
Amazon Channels the real competition for cable
The real threat to pay TV does not come from vMVPDs. Amazon Channels allows consumers to exactly what most of them say they want: to pick their bundle SVOD channel by channel. Moreover, the company recognizes that complexity is a problem as people move online. Speaking at the 2017 Next TV summit, Amazon Channels’ Richard Au said:
“It’s a great time to be a fan of video because there’s so much great content, but one of the challenges as a consumer is how to find the things that you like. We want to offer all of that content in a very integrated, easy way.”[vi]
Amazon is also beginning to add linear TV channels to the Channels line-up. Moreover, it is a very small step for the company to begin to create targeted bundles of linear and on-demand channels. If the company takes that next step, and we at nScreenMedia believe the company will, that is perhaps the biggest threat to pay TV of all.
Why it matters
Industry analysts do not think vMVPDs are much of threat to pay TV.
However, this is a misreading of how vMVPDs are approaching their business.
vMVPDs expect customers to compensate for their deficiencies with other SVOD services.
Such an aggregation of services is a big threat to pay TV.
[i] Dade Hayes, Veteran Media Analyst Jessica Reif Cohen: Skinny Bundles “So Far Are One Big Yawn”, Deadline.com, Oct 19 2017
[ii] TiVo, Q2 2017 Video Trends Report, TiVo, Q3 2017, p9
[iii] Ericsson consumer Lab, TV and Media 2017, Ericsson, Q3 2017, p5
[iv] TiVo, ibid. p12
[v] Jeff Baumgartner, fuboTV, LA Kings do deal, Multichannel News, Oct 6 2017
[vi] R. Thomas Umstead, Next TV Summit 2017: Amazon Channels Offers Consumers More Content Choices, Multichannel News, Oct 18 2017