Year in Review: Pay-TV goes virtual

AT&T's John Stankey speaks at the launch announcement of DirecTV Now on Nov. 28, 2016. Image: AT&T / YouTube
AT&T's John Stankey announces DirecTV Now. Image: AT&T

FierceCable is wrapping up an eventful 2016 by taking a hard look at five of the most important trends and developments that emerged in the market this year. Today we look at pay-TV offerings going online.

The news: 2016 was the year that satellite and telco operators in the pay-TV ecosystem decided that they could only beat over-the-top distribution by joining it.

Dish Network actually launched its IP-based Sling TV platform in February 2015. But it spent 2016 making a series of huge upgrades to the platform, adding broadcast network content and even a cloud DVR.

Sony — which also launched its PlayStation Vue in 2015 with little fanfare — addressed some key issues in its virtual MVPD platform by adding essential networks like ESPN and streamlining its pricing model.

Then came a flurry of new challengers. Perhaps the most notable is DirecTV Now, which AT&T launched last month with a streaming bundle of more than 100 channels.

Hulu, meanwhile, confirmed plans to launch a live-streamed virtual pay-TV service in early 2017. And Google not-so-quietly carved out deals with companies like CBS Corp. for its own v-MVPD service, Unplugged, also launching next year.

Why it’s important: While the technological execution still needs work, it’s hard to deny that pay-TV is evolving into app form. For those who buy in, there are undeniable benefits — no longer will operators have to supply customers with truck rolls and pricey, leased equipment. Customers, meanwhile, can add and cancel service anytime they want, and can watch their content on any device they desire.

For its part, AT&T said DirecTV Now is merely targeting the 20 million or so U.S. consumers who currently have broadband but don’t have pay-TV. However, quietly, off-the-record interviews with AT&T executives suggest that plans are much bigger for the virtual platform: They think it’ll be bigger than DirecTV satellite or U-verse by 2020.

For cable operators, going over-the-top is a more complicated endeavor. After all, they generally possess more regional ambitions, and they also have a long history of not competing with each other. Further, cable operators added another 775,000 broadband customers in the third quarter and now control over 62 percent of the U.S. ISP market. In many cases, the network is the business.

It was telling though that, towards the end of 2016, Comcast carved a deal to integrate Sling TV on the X1 platform. Thus, 2016 may be the year that hinted at the future of pay-TV video delivery.