vMVPD and SVOD services have pushed prices up faster than inflation for at least six years. But market forces are conspiring to restrain streaming TV price inflation from here on out.
Doesn’t it feel like streaming TV services have been piling on the price increases? If that is how you feel, you have a good reason. What started as a great source of cheap(er) premium TV entertainment is eating up an ever-increasing chunk of our entertainment budgets.
vMVPDs, SVODs raising pricing
Virtual MVPDs have led the price explosion in the US. Since its launch in 2017, YouTube TV has increased prices from $35 a month to $73. Hulu+Live is not much better, as its price has risen from $40 a month at introduction in 2017 to $70 today. Finally, the original vMVPD Sling TV has seen its lowest-cost Orange tier increase from $20 monthly to $40 in 2023.
Netflix has also increased its charges for its Standard plan over the same period. In 2017, it was $10 a month, but it costs $16 today. On the other hand, Hulu with ads is the best deal of all. Thanks to a price decrease in 2021 from $8 a month to $6, it has only just returned to $8 a month.
Price rises are above inflation, except for Hulu
Inflation in the US has varied between 2% and 7% over the past six years, with an average annual value of 4%. Streaming TV services have increased prices far more:
- Sling TV and YouTube TV have increased subscription prices by an average of 13% a year
- Hulu+Live increased prices slightly less, by 11%
- Netflix Standard pricing has increased by an average of 8% per year
- Hulu with ads price is the same as it was in 2017.
vMVPDs running out of room to boost prices
When YouTube TV launched in 2017, the largest cable TV provider in the country, Comcast, received an average of $85 monthly for TV service. YouTube TV’s $35 a month for many top cable channels sounded like a great deal, allowing users to more than halve their cable bill and save $50 a month over Comcast. Today, the average video subscriber pays Comcast $105 monthly, while YouTube TV costs $73. Today, a Comcast video subscriber would reduce their video bill by about a third, saving $32 monthly if they switched to YouTube TV.
Two factors suggest that vMVPDs cannot continue to raise prices at three times the inflation rate. Firstly, the value delivered by the big bundle of TV channels has plummeted over the last few years. The best entertainment is now found in streaming TV services. Increasingly, premium sports are available to streamers without a traditional pay TV service. Secondly, the price difference between vMVPDs and traditional pay TV eroded, making switching from cable a much less money-saving prospect than in 2017.
Pressure from FASTs will rein in SVOD price increases
TiVo’s Q4 2022 Video Trends Report shows that SVOD price increases are starting to wear on subscribers. The number of people dropping an SVOD service in the previous six months increased from 18.2% in Q4 2021 to 26.6% in Q4 2022. The number one reason cited for canceling a service was that it had raised prices.
At the same time, FAST usage continues to grow. Almost two-thirds say they watch at least one free streaming TV service. Of those, two-thirds say they watch because it is free. With more FASTs producing original content and continuing to license quality TV and movies, the quality perception of FASTs is catching up to SVOD. 60% view the quality of the services as very good, versus 79% for SVODs.
The increasing quality of FAST services will restrain the ability of SVOD providers to continue to raise prices faster than inflation.
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