Deeper Dive—Nothing’s dying in pay TV, it’s just getting segmented and iterated

Graveyard (Image: Pixabay / darksouls1)
When we ask if something in pay TV is going away, we’re often told it really isn’t. Someone in a market that’s being increasingly segmented still wants it. And if it’s not good right now, just wait until the next iteration. (Pixabay)

Business journalists tend ask many different questions in the same morbid way.

Is the pay TV set-top dying? Is the big pay TV bundle dying? Which virtual pay TV service is going to be the first to die? 

In fact, I heard all of those questions posed—some of them multiple times—at our first annual Pay TV Show in Denver a few weeks back. The answers were always nuanced, often vaguely unsatisfying … and sometimes funny as hell.

“That’s like walking into the baby section of a hospital and saying which one of these children is going to survive,” quipped Brett Sappington, senior director of research for Parks Associates, answering Fierce Telecom Group Editor-in-Chief Mike Dano’s question about which vMVPD will probably bite the dust first. 

Most often, when we ask if something is going away these days, we’re told it really isn’t. Someone in a market that’s being increasingly segmented still wants it. And if it’s not good right now, just wait until the next iteration.

Indeed, at our Pay TV Show, “segmentation” and “iteration” were buzzwords that came up again and again, as executives described a new paradigm of services that are increasingly software-driven, constantly updated, targeted to narrower and narrower demographic groups, and monetized in ways that aren’t always outwardly apparent. 

At a Pay TV Show panel focused on integration of streaming services into pay TV set-tops, I asked executives from Roku and Android TV if we might soon see the leased box give way entirely for an app-based future. Sure, that is and will be fine with a certain youthful, mobile-consuming segment of the market. But sitting next to me, Arris CPE chief Charles Cheevers wondered how that will play in another segment— homes in which the set-top/gateway has an increasingly centralized role in IoT-based automation. 

This week, AT&T CFO John Stephens talked along similar lines, describing what will be a trio of OTT products, with the incumbent midrange service DirecTV Now soon to be book-ended by the ultra-skinny $15-a-month AT&T Watch and a premium $80-$90 bundle that will mimic the 200-plus-channel offerings of DirecTV satellite and AT&T U-verse. At AT&T, the big bundle ain't going away anytime soon.

“You can serve another customer segment—those full products effectively serve the whole customer spectrum, and we still have the opportunity to take the benefits of advertising, data insights and information that you can get from that activity,” Stephens said, speaking at the Cowen and Company 46th Annual Technology, Media & Telecom Conference.

Stephens also tried to soothe investors concerned about the profitability of AT&T’s transition to an OTT focus, noting that the newer software iteration of the DirecTV Now platform includes vast new potential for monetization. 

“With the additional capabilities we just released with our next-generation DTV Now product, we feel like it is going to be a very strong competitor on a long-term basis in the over-the-top market,” he said.  “The ability of cloud DVR, the ability of the third screen, the ability of pay-per-view and video-on-demand, the ability to have additional data insights—all of those things are going to provide long-term success.”

Meanwhile, in regard to our morbid questions about the hotly contested vMVPD market, nothing looks close to death there, either. 

With Sony refusing to release subscription data on its PlayStation Vue service more than three years after its launch, we had wondered if Vue would be the first in the market to succumb to natural causes. 

But this week, Sony Interactive Entertainment chief John Kodera told reporters that Sony has no plans to shut Vue down.

The reasons for the reasonably good health report weren't what we expected. Simply put, he said Vue is generating too much useful data right now about PlayStation users.  

Indeed, at a time when Sony is iterating the future of its console business, it needs all the information it can get.

“We need to depart from the traditional way of looking at the console life cycle,” Kodera told The Wall Street Journal and reporters from several other outlets. “We’re no longer in a time when you can think just about the console or just about the network like they’re two different things.”