With Q1 2020 results in the bag, it appears that the growth era for virtual MVPDs is over.
The writing has been on the wall for some time, with Sony’s PlayStation Vue exiting the market at the end of January. That service was estimated to have around half a million subscribers who were up for grabs. Tellingly, the major services reporting (YouTube TV was absent this time around, which we’ll get into) saw a -319k reduction in subscribers versus Q4 2019. With VIP estimates for the services not reporting, and factoring in PlayStation Vue’s market exit, the total reduction is -900k.
Another telling sign was Google’s refusal to share a YouTube TV update in their earnings call, much as they did during their Q4 2019 call earlier this year. This suggests that, at best, growth was flaccid, and at worst, a net subscriber loss occurred. In VIP’s VMVPD sizing exercise, we took the middle ground and estimated growth was flat.
With ViacomCBS announcing earlier this week that they renewed their carriage deal with YouTube TV, and added 15 Viacom networks to the service, another price increase is to be expected. This is what happened after YouTube TV added Discovery, and may see subscribers cancel their service in these economically challenged times.
Fubo TV also made headlines this week by finally releasing a subscriber count, but opted to release the figures for Q4 2019, when their rivals were uncovering the Q1 counts. This indicates that subscriber counts were lower for one of the more expensive market offerings in Q1; accordingly, VIP assumed a net loss of 40k subs in our calculations.
Long seen as the answer to cord-cutting, by keeping former MVPD subs still in the live cable TV system, it appears that the market is shrinking as the cost of service continued to increase as network bundles swelled and providers moved from happy to attract any user to focusing on making a profit.
With many VMVPDs making live sports availability a core part of their package, the COVID-19 loss of games and events likely had an impact on the subscriptions. So must have the economic shutdown across the country, which began in March. But the finger can’t be pointed solely at COVID-19.
When Sling TV was launched in 2015, it was a true skinny bundle, with 12 networks for $20 a month. Today, the number of offered networks has swollen considerably, with Hulu offering 69 or more, YouTube about to offer 95+, and Fubo TV offering a minimum of 100. VMVPDs are now less of an alternative to cable than a different way to get the same experience, buy by paying someone other than the cable company for it.
With the looming recession, the smart money would be for providers to go back to basics and offer skinny essential bundles in order to entice the financially challenged. If they don’t, expect the VMVPD losses to stack up, possibly by 500k, in Q2.