Deeper Dive—Takeaways from the Pay TV Show

DENVER—FierceVideo’s second annual Pay TV Show has wrapped for 2019. The three-day event featured speakers from across the traditional and streaming video industry.

Highlights included a fireside chat with Showtime COO Tom Christie, a panel with executives representing the biggest virtual MVPDs, and a lively discussion with some of the top industry analysts.

Now that it’s over, let’s take a look back at some of the major topics and trends that dominated discussion during the show.

Rebundling is happening

“Pay TV 3.0” is how Michael Greeson, president and co-founder of TDG Research, referred to when he took the stage early on day three. But the industry and consumers probably know the concept better as the streaming aggregation platforms, including Amazon Channels, the Roku Channel and Apple TV channels.

Right now, those services are about offering consumers a unified platform for subscribing to and paying for streaming services like HBO, CBS All Access and others. But it could eventually go a step further.

“I can imagine a moment a few years down the road where they start to bundle these channels together for you,” Greeson said. He added a warning to traditional service providers to not sleep on this model.

Comcast has already taken a step toward Pay TV 3.0 with the launch of Xfinity Flex, its X1-like service for broadband-only subscribers. And it’s possible that other providers will follow suit.

For now, it’s clear that the fragmentation caused by so many different direct-to-consumer video services—which will get even bigger when Disney, NBCUniversal and WarnerMedia join the fray later this year and next—is driving a desire in consumers to have all their channels back together in one place. A bundle, if you will.

Virtual MVPDs can still improve

The previous two quarters have not been especially kind to Sling TV and DirecTV Now, the two biggest U.S. virtual MVPDs (based on publicly available subscriber totals). Sling TV’s growth has continued, but has drastically slowed down, and DirecTV Now posted a net loss for the second quarter in a row.

This is largely happening because of price increases instituted by DirecTV Now, YouTube TV, Hulu with Live TV and FuboTV. But there could other contributing factors. Philo CEO Andrew McCollum said during a panel on day three that the greatest barrier to streaming TV is that it’s still pretty complicated, a far cry from the full-service installation and setup that comes with traditional pay TV.

Warren Schlichting, group president of Sling TV, suggested that instead of focusing on subscribers, vMVPDs should focus on the targeted advertising opportunities on their platforms.

“By our numbers, we think we might be the only OTT service with a positive growth margin. Every subscriber helps us defray fixed costs,” Schlichting said.

If more vMVPDs can copy Sling TV’s strategy, the industry can probably expect more revenue and profit stability, even if subscriber growth trends continue fluctuating.

Price parity could tilt the scales

Baker Media's Bridget Baker (left)
chats with Showtime's Christie (right).

vMVPDs originally entered the market as a value-conscious alternative to more expensive traditional MVPD channel packages. But that perception, coupled with a fairly easy means of canceling service, has led to elevated churn levels for vMVPDs. Greeson said vMVPD subscribers are twice as likely to cancel service as traditional MVPD subscribers. He added that one of the reasons DirecTV Now raised its prices is because the service didn’t want to be considered a value play anymore.

Expanding programming lineups surely play a role in vMVPD price increases as well. Regardless the reasons, vMVPDs are inching closer to price parity with MVPDs and people are noticing.

Showtime’s Christie relayed an anecdote about a staff of young developers he oversees in Showtime’s product group, and how he’s watched as their conversations have turned to the rate increases at vMVPDs. He called it an indicator that cord cutters may stop seeing the value of skinnier bundles, and could begin reconsidering traditional TV service, sparking a return to growth for MVPDs.

“It wouldn’t shock me,” Christie said.