The cost of watching TV via a virtual MVPD service keeps going up.
Hulu’s “Hulu With Live TV” service is the latest to see an increase in monthly fees, up a whopping 18% to $65 as of Dec. 18. VMVPD operators like FuboTV and YouTube TV have added new channels in 2020, from Disney and ViacomCBS respectively, and then increased prices to cover the cost.
Unlike those services, Hulu did not add any new networks this year, and in fact did the opposite, removing Sinclair-owned regional sports networks in October. Typically, the addition of new networks is what’s used to justify the service increase, but as this didn’t occur with Hulu, it raises a few possibilities.
The first is that Hulu feels confident given its emergence as the clear leader in the vMVPD market and think very few consumers will consider switching despite the service now being tied third for most expensive vMVPD tier (and close to the cost of some basic-cable tiers).
The price increase also revisits the idea that running a vMVPD service is currently an unprofitable venture. That’s why Sony closed down its PlayStation Vue service this year and why AT&T’s TV Now service has shed subscribers at a considerable rate as it removed promotional pricing.
The vMVPD market is a long-term game, with eyes on the potential that can be made from addressable ads, which are integrated with other services — i.e., internet and mobile — a viewer uses. The downside to this is subscriber bases haven’t grown as quickly as envisioned, and with TV networks bound by existing agreements with MVPDs and unable to strike new, cheaper deals with emerging vMVPD services, the cost of running a service often is greater than revenues coming in.
Hulu’s price hike means it is now more expensive than the average mean price of service in the U.S. ($50.67). The increase comes too late in Q4 to derail what should be another quarter showing impressive growth for Hulu. But now that Hulu is one of the most expensive options, it is possible that its lead over other vMVPD services will be eaten into over the coming months.
VMVPDs aren’t going away. But they’ve veered from the original vision of Sling TV, which was to provide a slimmed-down version of the cable TV bundle to keep discontented subscribers within pay TV. Packages that keep adding networks have to constantly up their prices, while those that have stayed at a similar size — Sling TV, AT&T TV Now, Philo—have also not seen an increase in the past year.
As vMVPD prices creep up to costing a similar amount as regular cable once internet is included, the value proposition erodes. It may be time for vMVPD providers to revisit their ethos and go back to basics in order to fill a gap in the market, instead of competing directly with MVPDs.