YouTube TV Price Hike the Latest Sign Virtual MVPDs Are Backfiring
Virtual MVPDs were intended to be a cheaper alternative to traditional cable television packages. But it doesn’t turn out that way.
That’s the key takeaway following YouTube TV’s announcement of a new 12% price increase to $73 per month, making it the third service to see a price increase after DirecTV Stream and some Sling TV packages with local ABC partners announced in 2023.
The average cost of a VMVPD package has increased by $13.46 (28%) since January 2021 and is now $62.33. This average is calculated from the cost of a new subscriber for available DirecTV Stream, Frndly TV, FuboTV, Hulu With Live TV, Philo, Sling TV, and YouTube TV packages.
The median average VMVPD bundle is now $70, a 27% increase from the median of $55 in January 2021.
Essentially, this means that the cost of many VMVPD services now matches that of cable with broadband, after accounting for internet service costs. While VMVPDs offer improvements over traditional TV through better picture, a modern EPG, free cable box and in many cases free DVR, these can be minor upgrades for those who already have traditional service when little savings are possible .
Not all VMVPD services are expensive. Companies like Philo (which has many cable TV stations involved) and Frndly TV don’t offer broadcast stations and local or national sports channels, which allows them to keep costs down by offering only entertainment-based channels.
One could even argue that Peacock becomes the most cost-effective VMVPD by offering three Hallmark channels and Reelz for $5 per month. Sling TV has retained its original value proposition of lower cost network bundles (or all networks at a higher price point).
In the case of YouTube TV, they’ve battled rising costs for as long as possible, with the previous increase to $65 coming in June 2020. But since the service, which provides access to networks, always pays exorbitant sums for sports content, these costs are passed on to all subscribers, whether they watch sports or not.
The number of VMVPD packages offered to consumers has fallen to 16 (-33%) from its peak of 24 last recorded in April 2021. This reflects both the entry and exit of companies like Sony PlayStation – part of the original wave of VMVPDs – and T-Mobile’s TVision service, as well as the decreasing number of packages some providers are now offering to new subscribers.
It is difficult to accurately estimate the size of the domestic VMVPD market as only three of the seven operators report quarterly subscriber numbers. What is clear is that the industry has grown while traditional MVPDs have declined (link to the latest cord cutting update), strongly suggesting that many have traded one TV provider for another. That can change as costs rise.
The rising prices could also prompt some to create their own bundles consisting of a low-cost VMVPD service and a way to receive network TV for free. Should the promise of ATSC 3.0, with its 4K signal enabling free high-quality sports, ever materialise, it could tip things as 15% of US HHs are OTA only and another 13% are antennas coupled with other viewing methods use.
It is unlikely that many VMVPD services will initially be curtailed due to the price increases as the industry has already weathered many such increases. However, it will likely slow adoption and growth. Since Alphabet reports YouTube TV subscribers extremely sporadically, there will be no way to assess the impact of the surge (another point against streaming’s lack of transparency into user metrics).
The tipping point of large VMPDs costing the same as the MVPD service is fast approaching. With MVPDs now offering large signup discounts to drive down the service’s sticker price, a shift in consumer attitudes is becoming increasingly likely.