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nScreenNoise – Why vMVPD growth will cease by 2025nScreenMedia

vMVPD subscribers grew by 10% over the last year, while traditional pay TV fell by 13%. But the differences between them are narrowing, and by 2025, they will move as one.

Well, it’s January, and, as usual, vMVPDs and traditional pay TV operators are raising their prices. And raising them at rates faster than inflation. However, the industries are headed in the opposite direction. vMVPDs are growing while cable, satellite, and telco TV are shrinking. But in today’s podcast, I discuss why, by the end of 2025, the industries will move as one.

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Now back to the podcast.

Fubo is raising prices again (2:40)

Fubo instituted its biggest price increase ever in January 2023. The company boosted the price of each of its three service tiers by $5 a month. It also added a mandatory regional sports network fee of between $11 and $14, depending upon which area a subscriber lived in. These price rises increased the average revenue per unit by $9 per month in 2023 to $84.

Fubo customers were undeterred by the price increase. The company added 200,000 subscribers in the first three quarters of 2023 to finish with 1.5 million.

Fubo will once again boost the subscription fees of all tiers by $5 a month in February and increase the RSN fee by $1. The resulting increase will likely boost ARPU to $90 a month shortly thereafter. The company points to two reasons for the price increase: the addition of new content and increases in the license fees programmers charge for their channels.

Disney boosted Hulu+Live costs in October 2023 (4:30)

Disney has not been shy about raising prices for its direct-to-consumer services recently, and Hulu+Live is no exception. In December of 2022, Disney raised the price of Hulu+Live by $5 a month to $75. Despite the sharp price increase, the service saw a tiny 2% increase in subscribers over the next three quarters, finishing with 4.6 million.

Bob Iger, Disney’s CEO, thinks Hulu+Live subscribers will stick around to pay even more. The service increased in price by $7 in December of 2023 to reach $77 monthly for its entry-level tier. The company offered no reason for the price increase other than they could. As Mr. Iger said during the earnings call in July 2023:

“We were pleasantly surprised that the loss of subs due to what was a substantial increase in pricing for the non-ad-supported Disney+ product was de minimis. It was some loss, but it was relatively small. That leads us to believe that we, in fact, have pricing elasticity.”

Last March YouTube TV increased prices $8 a month (12%), Sling TV boosted entry level plans by $5 a month (14%.) The inflation rate in 2023 was 3% or so.

Comcast is raising the price of video (7:00)

The price of traditional pay TV continues to increase despite the rapid decline in subscribers. Comcast has increased subscription fees substantially every year for the last five years. These increases have resulted in ARPU growing between 6%-8% every year since 2020. 2024 looks to be no different. The company boosted the price of its TV service by $6 a month in January 2024. It also added $4 monthly to the broadcast TV fee and $1 for RSNs.

Even though Comcast has raised prices significantly over the last seven years, vMVPDs have increased their subscriptions faster.

vMVPD savings over cable TV have halved since 2018 (8:00)

In 2018, switching from Comcast TV to Fubo and Hulu+Live would have saved a subscriber a lot of money. The average Comcast TV customer paid twice as much as the Fubo customers, and Hulu+Live customers paid 38% less. A Comcast video customer would have saved between $400 and $500 in 2018 by switching to Fubo or Hulu+Live.

By 2023, the savings a viewer could make by switching to a vMVPD had halved. Fubo customers saved 25% over Comcast TV and Hulu+Live customers 18%. A Comcast video customer would have saved between $240 and $320 in 2023 by switching to Fubo or Hulu+Live.

Over the next year or so, the price difference between vMVPDs and traditional pay TV will continue to narrow. And that won’t stop until the only savings to be had by switching to a vMVPD will be the set-top box rental and local taxes and fees.

Why prices keep increasing (9:45)

So, why do prices keep rising? The biggest cost faced by traditional pay TV and vMVPDs is programming license fees. And programmers like Disney, WB Discovery, and NBCU have not been shy about asking for big increases each year.

Consider what happened to Comcast’s video business between 2015 and 2022. ARPU grew by 30%, but programming costs were up by 77%!

As the biggest traditional pay TV provider, Comcast can negotiate a better deal than smaller players, like the vMVPDs. What’s more, as the vMVPDs launched at bargain basement prices, they could not absorb price increases from the programmers. They had to pass them along to subscribers. That is why we have seen YouTube TV, Fubo, and Hulu+Live raise prices so quickly, with regular $5 raises. YouTube TV cost $35 a month when it launched in 2017. Now, it costs more than twice as much, $73 a month.

vMVPDs and traditional pay TV are the same businesses (13:00)

The truth is that vMVPDs and cable TV are the same business. They are governed by the same dynamics and ultimately rise and fall together. Or should I say fall and fall together.

In the short term, some of the people who leave traditional pay TV will subscribe to a vMVPD to save a little money. But many cut the cord completely. Between Q3 2022 and Q3 2023, nearly 3 million people subscribed to a vMVPD. Over the same period, nearly 9 million people left their cable, satellite, or telco TV providers.

As the cost difference continues to narrow between traditional pay TV and vMVPDs fewer people will consider the savings enough to change. Worse still, vMVPD customers will begin to realize they simply don’t need traditional linear TV at all and will start to leave. And as vMVPD pricing continues to increase faster than traditional pay TV, by the end of 2025 there will be almost no material difference at all. Which is why I believe the vMVPD industry will start to decline next year.


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