Sony surprised the pay TV industry this week when it announced plans to shut down PlayStation Vue on January 30, 2020. Now, after years of relative stability in the virtual MVPD market, a shakeout could be starting.
John Kodera, deputy president of Sony Interactive Entertainment, said the costs of running the service had become too much to shoulder.
“Unfortunately, the highly competitive pay TV industry, with expensive content and network deals, has been slower to change than we expected. Because of this, we have decided to remain focused on our core gaming business,” wrote Kodera in a blog post.
Emily Groch, director of insights for telecommunications at Comperemedia, said PS Vue’s downfall may have had something to do with consumers thinking they needed a PlayStation console to access the service (and Sony not doing enough to clear up any confusion). She said it also could have to do with marketing and building overall awareness.
“It's no surprise to see that Playstation Vue is the first major vMVPD to fold,” wrote Groch in an email to FierceVideo. “Sony always seemed to treat the service as a value add for Playstation Network users. Although Sony ran a handful of national TV ad blitzes over the past few years, it did not make a serious or consistent investment to drive awareness of the service beyond its core gamer base. Its online advertising largely fizzled beyond mid-2017, and it has spent minimally on marketing for PS Vue in 2019.”
Sony cited expensive content deals as a core reason for shutting down PlayStation Vue, but there may have been other factors driving up costs for Sony. Andrew McCollum, CEO of Philo, a similar vMVPD that focuses on offering entertainment channels, said his company built its own tech platform so it can operate more efficiently. PlayStation Vue, however, relied on BAMTech (now Disney Streaming Services) to build its live streaming TV service. Working with tech vendors, who are also trying to drive up revenues and margins, can meaningfully increase operational costs, McCollum said.
Whatever the full list of reasons for PlayStation Vue’s closure may be, the service’s exit leaves a vMVPD industry that’s in flux.
Who’s next?
With PlayStation Vue soon out of the picture, that leaves Sling TV, AT&T TV Now (formerly DirecTV Now), YouTube TV, Hulu with Live TV, FuboTV and Philo along with smaller players like Vidgo to carry the vMVPD flag. But one analyst firm predicts the herd could thin even further soon.
TDG Research predicted in early 2018 that two vMVPDs would close or sell off within a two-year horizon. Michael Greeson, president and co-founder of TDG, said some vMVPDs have clear advantages over others.
“As we wrote in our December 2017 report on the future of vMVPDs, it will be the deep-pocketed tech-media firms that win out—those with the patience to fund losses until the market shakes out,” Greeson said.
McCollum echoed that, and said it’s been well known for a while that many of these services came to market at price points that didn’t work. That’s why there have been steady price increases. Even after price hikes, many vMVPDs were still not making money.
“At that point it becomes a question of what is your pain tolerance,” McCollum said in terms of how much money companies are willing to lose to make their products work and gain scale.
McCollum said that Philo’s approach has been geared more toward creating a sustainable price point and not luring in tons of subscribers before raising prices. Philo recently did stop offering its less-expensive channel package, but it grandfathered in subscribers at that price and hasn’t raised prices on its more expensive package
“I can’t stand here today and say that we’ll never raise our prices,” said McCollum. “But we’ve tried to build Philo in a way that the fundamental model is more sustainable.”
FuboTV, a vMVPD with a wider breadth of content including sports, has had to raise its prices as it’s added more programming from Discovery and Viacom. While the company has stayed in the race against its bigger rivals, FuboTV CEO David Gandler has said that M&A isn’t off the table, which makes FuboTV a logical candidate to sell itself off in the future.
But before that happens, there’s a good chance that AT&T TV Now will ride off into the sunset. The service has been steadily losing subscribers, and increasingly looks like it doesn’t completely fit with AT&T’s future video plans. At this week’s WarnerMedia Day, AT&T outlined a multi-year video strategy revolving primarily around HBO Max, its upcoming subscription streaming service, and AT&T TV, its upcoming live streaming TV service. The company also said it will incorporate ad-supported video and live video into HBO Max, which seemingly confirmed earlier reports that AT&T plans to merge AT&T TV Now and HBO Max.
While that doesn’t necessarily equal shutting down AT&T TV Now, it does indicate the kind of consolidation of power the vMVPD industry will likely experience over the next few years.