To those of you not familiar with the industry lingo, a vMVPD is a virtual multichannel video programming distributor, or virtual cable company. This term is being used to describe OTT providers that offer a version of the same channels offered by cable companies. This sector includes Sling TV, DirecTV Now, Playstation Vue, Hulu Live, YouTube TV and a few others. These providers stream networks on the same linear schedule as is shown on cable TV. Providers of alternate programming like Netflix or Amazon Prime are not considered as vMVPDs.
Industry analysts say that the vMVPDs as a group gained over 900,000 customers in the recently ended third quarter. That is a startling number and represents almost one percent of the whole traditional cable TV market, all captured in just one quarter. We’ll have to wait a bit to see how the whole cable market performed. But we already know that Comcast lost over 150,000 cable customers for the quarter. Since they had been hanging onto cable customers better than the other cable companies I think we can expect a bloodbath.
This kind of explosive growth is perhaps the best harbinger for the slow death knell for traditional cable TV. This new industry is still less than three years old with Sling TV having launched in February 2015. The industry started slowly and had only a few hundred thousand customers at most by the end of 2015.
But it’s now obvious that a lot of people are deciding that they don’t want to pay the big monthly bill for the giant channel line-up. The analysis from Nielsen shows that most households only watch a handful of channels. While no vMVPD is probably going to give households exactly the channels they most want to watch, they are obviously providing enough channel choices to lure people away from the cable companies.
It’s an interesting transition to watch. To some degree the programmers are contributing to their own demise. When people leave a cable line-up of 200 channels to instead watch an vMVPD line-up of less than 50 channels there are obviously a lot of networks that are no longer collecting customer fees. Practically every network is bleeding customers and this shift to OTT viewing is going to kill off a lot of network channels. I read an interview a few months ago with the head of programming at Fox who believed that his company would shut down the majority of their cable networks within a few years.
Another thing I find interesting about this shift is that the vMVPDs are not particularly easy to use. I’ve now tried four of them – Sling TV, DirecTV Now, Playstation Vue and Fubo TV, and I will get around to trying them all eventually. None of them have the ease of use of a cable settop box. You can’t just surf through channels easily to see what’s on and you have to instead navigate through menus that take several steps compared to a simple ‘channel up’ command on a cable remote.
These four services also have channel guides of a sort, but they are also cumbersome to use. I’ve found that it can easily take three or four minutes to change between two shows, and that’s when you know what you want to watch. The guides on these services are not yet friendly for looking hours or days ahead to see what you might want to watch later. And at least one of the services, Playstation Vue, is so confusing that I often get lost in its menus.
And yet nearly a million people changed to one of these services in the last quarter. The biggest appeal for these services is price along with a total ease to subscribe or unsubscribe. After years of dealing with big cable companies I was apprehensive the first time I tried to unsubscribe to Sling TV – but it took less than a minute to do on-line and was not a hassle. The services differ in features like the number of people who can watch different programming at the same time on an account, but they are all becoming more people friendly over time.
At this point AT&T might be the only company that is getting this right. The company lost 385,000 customers in the third quarter between DirecTV satellite service and U-verse. But they gained 296,000 DirecTV Now customers to make up for a lot of those losses. At this point nobody is talking about the margins on vMVPD service, but it can’t be a whole lot worse than the shrinking margins on traditional cable TV.
I believe we are seeing the future of TV in the vMVPD product. We’ll probably look back five years from now and laugh at these hard-to-use first generation services. I’m sure that over time they will get far easier to use and I’m getting ready to experiment using my Amazon Echo to navigate through Playstation Vue. When it becomes simple to use vMVPDs, then traditional cable TV might have become passe.