YouTube is putting together an over-the-top (OTT) live TV package to launch in early 2017. Hulu will unleash its own live OTT package in early 2017 as well. AT&T — currently in talks to buy Time Warner — will beat them both out of the gate, launching its own bundle of 100-plus channels delivered over the internet by the end of 2016. Apple and Amazon have long been rumored to want live TV packages of their own.
All of this is to say: The bundle isn’t dead, it’s just changing addresses.
These current and would-be live OTT providers can be put into two buckets. One is pay TV companies trying to capture customers who probably weren’t all that likely to subscribe to a traditional cable package in the first place: Dish Network with Sling TV, AT&T with DirecTV Now, Comcast with Stream. The other is purely digital players looking to become more like traditional pay TV companies: Hulu, Google/YouTube with Unplugged, Sony’s PlayStation Vue.
Sling TV has been available since January 2015. The product has been adding channels at a quick clip, forming two basic packages for $20 each (one that includes 20th Century Fox channels and one that includes Disney/ABC channels) and a wide array of add-on channel packs for around $5 each, plus premium channels like HBO and Starz. Recent additions include Viacom networks like Comedy Central and the Hallmark Channel.
DirecTV Now isn’t meant to appeal to customers who want some sort of skinny bundle. AT&T hasn’t revealed a price, but has signed deals with NBC Universal, Viacom, Turner, Disney, Scripps, and other major programmers. The goal is to entice the 20 million people who don’t subscribe to pay TV by making it literally as easy as pressing a button to do so — or to cancel if they so choose. Analyst estimates for the price of this package range from $50 to $70 per month.
Hulu is firming up the programming for its package, which, contrary to popular belief, is not currently called “Hulu Live” when it launches in the first quarter of 2017. The company is in advanced talks with 20th Century Fox and Disney, with sources saying the deals are just about ready to sign, and negotiations with other big network groups are also ongoing. Turner was one of the first big network groups to sign on, when parent company Time Warner took a 10% stake in Hulu. The Hulu product will be designed to integrate seamlessly with Hulu subscriptions, giving it a potential subscriber pool right off the bat of 12 million.
Analysts estimate the Hulu bundle will probably cost around $40, though that’s subject to how many of these deals have been completed at time of launch. Not every major network needs to be signed to a deal before launch for these companies, insiders at the companies developing these products told Variety.
YouTube just signed a deal to carry CBS, CBS Sports Network, and Pop, the cable network it co-owns with Lionsgate. A young-skewing digital outlet making a deal with a network that skews the oldest of the four big broadcasters might seem weird on its surface, but Pivotal Research Group analyst Brian Wieser sees a method to it. “From a P&L perspective, it looks like a distinct standalone business they’re building,” he told Variety.
What the company could do in theory is bundle the advertising slots it would get from its programmers’ feeds with its Google Preferred ad inventory. “There’s a lot of short-form content out there and most of it isn’t worth anything” from an advertising perspective, Wieser continued. “If Google really wants to take TV dollars, they need to go after that long-form.”
Google faces a not-so-small hurdle. “The problem is, this becomes a me-too offering,” Wieser said. “There are a lot of folks doing exactly the same thing, and not many people who want the true cord-cutting experience.”
That’s not just a gut reaction from Wieser. Uptake for over-the-top services has been more anemic than all the online chatter and vitriol against cable companies might indicate. Dish no longer breaks out subscriber numbers for Sling from those for its satellite service, but the latest analyst estimates put Sling’s subscriber base at 776,000. PlayStation Vue only launched nationwide in March, but reports from the summer indicated it had anywhere from 100,000 to 120,000 subscribers.
That isn’t to say there is no demand for live OTT packages, or that they won’t eventually attract large numbers of customers: A September study from UBS projected 15 million households would subscribe to Internet pay TV services by 2020. That’s a much smaller number of subscribers than, say, the satellite sector (33.4 million), but considering the Internet TV sector of the pay TV industry is a mere five or so years old at that point, that’s not too shabby.
Yet a glut of offerings competing for a much smaller customer base is still a challenge. “There’s probably some willful optimism there,” Wieser said.
Some executives Variety spoke with at these companies had a slightly different perspective. In many cases, these players aren’t expecting to make a big profit from the services themselves — video is an expensive business. But the data flowing in from these viewers is quite appetizing to advertisers, and in some cases a higher-priced product can provide some glue that prevents excessive churn.
In other words, they’re playing the long game.