Price hikes strike cord-cutters
It’s official. Once the preferred starting price point for many of the digital cable alternatives, the $35-all-you-can-stream bundles will, by the end of the month, vanish from the market.
That’s because AT&T this week decided to hike up its DirecTV Now prices, meaning all of its streaming TV packages, including the base $35 monthly subscription, will be $5 more per month for all customers as of July 26. Sony also announced it will be charging $5 more per month, beginning July 24, on all PlayStation Vue tiers, with the cheapest bundle now starting at $45 per month.
Google did something similar earlier this year, bumping up the cost of its YouTube TV streaming service from $35 to $40 per month for new customers. Thankfully, early adopters got to keep the cheaper price (hooray for me), and everyone got to reap the rewards of more stations, most notably TBS, TNT and CNN.
Still, nobody likes to pay more. So what gives with the seemingly industry-wide markups?
Moving in groups: Price increases come in bunches, said Brett Sappington, a pay TV expert who follows traditional and Internet providers for the research outfit Parks Associates.
“The fact that they’re all doing price hikes in a group helps them,” he said.
Most of the companies initially launched with really low prices, and leaner content offerings by association, to attract the most attention. As the bundles have fattened, so too have the prices, Sappington said.
Currently, there as many as 6 million subscribers to online pay TV services in the U.S., according to Parks Associates. That number will shoot up to 9 million subscribers by the end of 2018 and double to more than 18 million subscribers by the end of 2020.
And while Sling TV, with an announced 2.3 million subscribers, is the industry leader, others are successfully jockeying for position, each with a slightly different proposition. For YouTube TV customers, the overall experience is the winning feature, whereas Hulu with Live TV includes traditional Hulu service, making the upgrade feel like less of a leap. Plus, the cost of DirecTV Now is partially subsidized for AT&T customers.
It follows, then, that if one service raises its prices, the others can surely afford to do so too without fear of losing subscribers to the competition. Clearly someone, somewhere, decided that $5 was a hike that people could stomach.
Content: Of course, the online pay TV providers aren’t just being greedy.
“The content industry doesn’t stand still,” Sappington said. “(Content makers) continue to ask for and push for higher prices … and cable TV prices continue to go up.”
Meaning, even with the hikes, the online pay TV providers will still likely be perceived as offering casual TV viewers a good value.
As it stands, cord-cutters have two types of service options: The beefy $40-or-more plans or the skinnier $25-and-under plans. In the former camp are DirecTV Now ($40 base plan), Hulu with Live TV ($40 base plan), YouTube TV ($40 base plan), PlayStation Vue ($45 base plan) and fuboTV ($40 base plan). In the latter group, Sling TV ($25 base), Philo TV ($16) and now AT&T’s WatchTV ($15 or free for some AT&T wireless subscribers) might satisfy someone who needs minimal local or sports stations.
One can most certainly expect these prices to continue to climb “so long as content costs continue to go up,” Sappington said.
If there’s a silver lining, it’s that these alternative models have forever altered how networks are packaged and sold to all pay TV companies, thus carving out a path for truly a la carte TV to potentially sneak its way into the market.
For proof, look no further than Charter’s Spectrum, which is hoping to reclaim customers with something called “Spectrum TV Choice.” Offered to Internet-only customers in some markets (I recently got the San Diego offer in the mail), the product lets people get all of their local stations and pick 10 additional channels – from a lineup of 75 stations – to build a custom skinny bundle. It costs just $22 a month, making it extremely compelling for the person who initially cut the cord solely to save money.
So – and I never thought I’d say this – if you’re looking for the best deal in TV, maybe you should keep your eyes on the cable companies for a change.
Jennifer Van Grove covers e-commerce and digital lifestyle for The San Diego Union Tribune. Readers may send her email at email@example.com.