Just before the WarnerMedia team took the stage to unveil details of HBO Max, Sony announced that would it shut down its 4 year old PlayStation Vue virtual pay-TV service on January 30th. The moves are 2 great examples of the constantly-shifting strategies of big media companies.
PS Vue was an early mover in virtual pay-TV (or “vMVPD”). But if you think of the industry in 4 quadrant terms, with price on one axis and channel lineup on the other, PS Vue was relatively high on both - it offered a mostly complete channel lineup competitive with traditional pay-TV operators, but not at a significantly reduced price (which is the top motivator for prospects).
VideoNuze readers know I’ve long been skeptical about the value proposition of virtual multichannel video programming distributors (“vMVPDs”) or “skinny bundles” as they’re commonly known. But as I touched on in last Friday’s podcast, based on some significant changes over the past year, I’m becoming more optimistic about skinny bundles’ prospects and their broader impact on pay-TV.
To take a step back, 3 main concerns have driven my skepticism about skinny bundles: (1) their incomplete channel lineups (the “Swiss cheese” challenge of too many holes, or missing TV networks) which reduces their appeal relative to pay-TV’s traditional multichannel lineups, (2) the dubious profitability of skinny bundles, especially given underlying programming costs, which raises the question of just how committed the big parent companies of skinny bundles are to them, and (3) viewers’ migration away from linear TV in favor of SVOD, which is driving up cord-cutting.
Here’s what’s changed:
Categories: Skinny Bundles
Virtual Multichannel Video Programming Distributors (“vMVPDs”) or “skinny bundles” have become a very hot topic in the video industry. Offering fewer TV networks and at a lower monthly price they’re seen as a way of keeping cord-cutters in the ecosystem while attracting cord-nevers. To learn more about the dynamics of vMVPDs, industry research firm (and long-time VideoNuze partner) The Diffusion Group recently completed a comprehensive study of vMVPD subscribers. I interviewed Michael Greeson, TDG’s president and director of research, to learn more.
VideoNuze: From a top-line perspective, what are the most important takeaways from your research?
Michael Greeson: First and foremost, while these services are successfully connecting with cord-cutters, they are entirely missing out with cord-nevers. Cord-cutters account for 54% of total vMVPD subs. The consumers were largely driven from legacy services by high service costs and paying having to pay for channels they don’t watch, and vMVPD services appear to better address these needs.
Cord-nevers, on the other hand, account for only 9% of vMVPD subs—clear evidence that these offerings are failing to resonate with younger buyers. And for good reason: cord-nevers are largely driven by a genuine lack of interest in multi-channel pay-TV services. They prefer a ‘build it yourself’ service that allows them to select and pay for only the channels they want, versus signing up for a bundle of channels.
Categories: Skinny Bundles
The competitive dynamics among skinny bundles are still developing, but one thing is becoming increasingly clear: including a full array of broadcast TV channels in all of the biggest U.S. markets, and even many of the smaller ones, will be table stakes. It seems as if a week doesn’t pass these days without one of the five major skinny bundles announcing a new carriage deal for certain broadcast channels in a variety of local markets.
So-called "skinny bundles" of TV networks face long odds of success given the dispersion of actual TV viewership, cross-ownership of broadcast-cable TV networks by media conglomerates and underlying economic realities, according to a new analysis by MoffettNathanson.
The conclusions align with points I made in last Friday's podcast and previously, as I've asserted that the "Swiss cheese" channel lineups found in skinny bundles will lack broad appeal. This was a central finding from recent Bernstein research as well. Conversely, bulking up channel lineups with more TV networks (as Sony has done with its new PlayStation Vue service) eliminates the opportunity for a cost-savings value proposition that would resonate most with would-be cord-cutters or cord-nevers.