DirecTV, Dish, and Sling take charge of virtual video
While the FCC fixates itself on "unlocking" the leased pay-TV set-top, operators are experimenting with services that require no set-top at all.
Within the last 12 months, no less than five virtual MVPD services from major operators have debuted, some in the testing phase and some as full-fledged, fully available consumer products. These services threaten to revolutionize the pay-TV industry, replacing expensive CPE, truck rolls and credit checks with simple, app-based delivery of video.
These services have differing goals and execution. With its 13-month-old Sling TV service, Dish Network (NASDAQ: DISH) says it wants to "take back" the fast-exiting portion of the pay-TV market with an economy-minded bundle delivered in the way younger consumers like to watch programming, over the Internet.
AT&T (NYSE: T) said pretty much the same thing last week when it announced that three virtual tiers of its DirecTV service will launch in the fourth quarter of 2016.
Still testing its Xfinity Stream service in select markets, Comcast (NASDAQ: CMCSA) says its goals for its virtual offering are also largely the same — it wants to bring broadband users who aren't currently paying for video into the pay-TV ecosystem. But there is a key difference for Comcast's streaming service, in that only Comcast ISP customers are eligible for the service, which is delivered over the MSO's managed network and is not technically an over-the-top product.
Time Warner Cable (NYSE: TWC), meanwhile, is also testing an IP-only bundle in New York City. Like Xfinity Stream, the TWC TV Roku Trial is available exclusively via TWC's Internet pipes. But the MSO says it's interested in moving its whole bundle to IP-only delivery.
Meanwhile, most of the telecom industry thought Verizon (NYSE: VZ) would launch a similar virtual pay-TV product when it purchased Cisco's OnCue video technology back in January 2014. But with Go90, the wireless operator is going after the mobile video market, specifically seeking an edge amid fierce wireless competition with a free service that's subsidized — for now — by advanced advertising.
Indeed, in this early, Wild West stage of IP-only product development, the services remain not only all over the map in terms of approach, but largely experimental in concept.
This doesn't mean, however, that they're not beholden to a bottom line.
"All of these pay-TV providers should be making something off of these deals," said Brett Sappington, senior analyst for research company Parks Associates. "I am fairly sure that none are offering a package at a net loss. Gross revenues on these skinny bundles should be relatively small, but so also will be the content costs."
Cox Communications, for example, recently scuttled its "Flare"-branded line of digital products, which included virtual MVPD services aimed at millennial consumers.
"With Flare, we tested an over-the-top platform that supported several different digital services — myFlare for storage, Flare Play for gaming, Flare Kids for Web videos. Each was designed to make it easier to discover and consume digital entertainment," said Cox spokesman Todd Smith to FierceCable. "All of this attracted more than 300,000 users. However, as market conditions within these services continued to harden, we were unable to monetize the user interest and Web traffic to the level we needed to sustain the business."
So, among a field that includes not only virtual services from well-known pay-TV operators and telecom companies, but also live-streaming MVPD products from outside that realm, such as Sony's PlayStation Vue, which is most likely to be here two, three or even five years from now?
"It's hard to tell at this point as they are all evolving," says Alan Wolk, senior analyst for The Diffusion Group. "This is a polite way of saying that none of them looks that good right now. Stream has DVR functionality, which is good. Go90 has deals with MCNs which is good. Sling has ESPN and CNN which is good. But no one's hitting a home run yet."
That's not to say these services aren't having an impact on the pay-TV business, either. Dish, for example, hasn't disclosed subscriber numbers for Sling TV since last June. But MoffettNathanson analyst Craig Moffett estimates the service added 129,000 subscribers in the fourth quarter, making it pay-TV's fastest growing service.
Below is a list of 10 virtual MPVD services, seven of them operated by traditional pay-TV companies and three services from operators outside the traditional pay-TV industry. The virtual MVPD market is still nascent so it's too early to begin ranking, but these services are leading the way in the early going.
Operator: AT&T/DirecTV
Launched: The service will debut in the fourth quarter of 2016
Availability: Nationwide
Platforms: Not yet disclosed
Content: Specific networks haven't been announced, but AT&T says that the Now product will not be a skinny bundle.
Cloud DVR: Not disclosed
Price: Not disclosed
Subscribers: N/A
Analysts say: "This is mostly about giving cord-cutters a way of staying with AT&T and maybe capturing some of the users that don't pay for TV," said Jackdaw Research analyst Jan Dawson.
Operator: Verizon
Launched: Oct. 2015
Availability: Nationwide
Platforms: iOS and Android tablets and smartphones only
Content: Licensed TV shows and live programs from Viacom, Discovery, Scripps, ESPN, CBS Sports, Univision and more; online video content from AwesomenessTV, Maker Studios, Vice, others.
Cloud DVR: No, but users can share content and get recommendations through social media.
Price: Free, ad-supported.
Subscribers: Verizon said in January that the Go90 mobile app has been downloaded nearly 2 million times.
Analysts say: Success will be entirely determined by Verizon's ability to find content that appeals to a millennial audience for which it's tough to program.
Operator: Dish Network
Launched: Feb. 2015
Availability: Nationwide
Platforms: Android, iOS, Apple TV, Amazon Fire TV, Chromecast, Windows, Xbox One
Content: Base offering of more than 20 channels includes ESPN, TNT, TBS, AMC, History and CNN. Add-ons include ABC, HBO and Cinemax.
Cloud DVR: Not yet, but channels including AMC and HBO offer significant on-demand content.
Price: $20 a month for base package; add-on modules are $5 a month.
Subscribers: WSJ reports Sling had 600K subs at the end of Q4; MoffettNathanson estimate has Sling at 523,000 customers.
Analysts say: Sling is the early leader, but Dish is at a huge disadvantage by not being able to package the service with broadband.
Operator: Charter
Launched: Testing began last fall
Availability: Trial confined to the Midwest
Platforms: Service comes with a free Roku 3
Content: Basic service includes ocal broadcast channels plus Showtime or HBO; additional $7 delivers top cable channels including ESPN, Discovery, FX, AMC, TBS and ABC Family.
Cloud DVR: Not disclosed
Price: $12.99 for basic service; $19.99 for Spectrum Stream Plus, which includes cable channels.
Subscribers: Not disclosed
Analyst say: Charter is being eerily secretive.
Operator: Sony
Launched: March 2015
Availability: Available only in Chicago, Dallas, Los Angeles, Miami, New York, Philadelphia and San Francisco.
Platforms: PlayStation 4, PlayStation 3, Amazon Fire TV and Fire TV Stick, Chormecast, iOS devices.
Content: Basic $40-a-month service includes all major broadcast channels, plus AMC, Cartoon Network and Viacom channels; ESPN available on higher programming tiers HBO, Showtime and Epix also available.
Cloud DVR: Yes
Price: Sony just lowered prices across all three tiers. They now range from $39.99 - $54.99 a month.
Subscribers: Not disclosed
Analysts say: Diffusion Group senior analyst Alan Wolk called Vue "DOA" when it first debuted. Addition of ESPN and lower price point makes it much more intriguing, however.
Operator: CenturyLink
Launched: Trial launch undisclosed
Availability: Four undisclosed markets
Platforms: CenturyLink CTO Aamir Hussain says Prism Stream "caters to the millennial age…It has smaller packages and we are going to trial…just to learn from that and understand what penetration it can bring."
Content: Not disclosed
Cloud DVR: Not disclosed
Price: Not disclosed
Subscribers: Not disclosed
Analysts say: No analyst comments yet
Operator: Time Warner Cable
Launched: Nov. 2015
Availability: TWC customers in Greater NYC area with DOCSIS 3.0 modems
Platforms: Service offers a free Roku 3 device, but service is viewable on iOS, Android, Xbox One and other OTT equipment.
Content: Base package includes all major broadcast channels; top tier includes more than 70 channels, including ESPN, AMC, TNT, Showtime & Starz.
Cloud DVR: No, but there is on-demand TVE availability through TWC TV app.
Price: Packages range from $10 - $50 per month.
Subscribers: Not disclosed
Analysts say: Moving to all-data system makes it easier to collect customer data and up-sell faster Internet tiers.
Operator: Layer3 TV
Launched: Began regional testing in December
Availability: Midland and Kingswood, Texas
Platforms: Not disclosed
Content: Base package includes broadcast channels plus top cable nets like ESPN; premium channels including HBO and Showtime are available.
Cloud DVR: Service includes an 8-tuner Pace DVR set-top.
Price: Not disclosed
Subscribers: Not disclosed
Analysts say: The service has a former 21st Century Fox executive negotiating content deals.
Operator: Comcast
Launched: Nov. 2015
Availability: Comcast Internet customers in select areas in Massachusetts, New Hampshire, Maine and the Greater Chicago area.
Platforms: Android and iOS; availability for Roku, Apple TV and other OTT devices is determined by what deals programmers have for their respective TVE apps.
Content: HBO, the Big Four broadcast networks, CW, PBS and Univision.
Cloud DVR: Yes. Has about 100 GB of storage, enough for around 20 hours of HD programming.
Price: $15 a month
Subscribers: Not disclosed
Analysts say: Makes sense if have consumers have Comcast Internet service and also want HBO.