• by Karlene Lukovitz  @KLmarketdaily, January 29, 2021

The once-in-decline vMVPD sector could become the dominant successor to traditional pay-TV — if the key players don’t get too greedy.

That’s the big takeaway (in my own words) from new Parks Associates research on virtual multichannel video programming distributor trends.

One survey finding in the report: 43% of U.S. broadband households with traditional pay TV said they’re likely to switch to a vMVPD in the next 12 months.

The research also found 17% of vMVPD subscribers reporting that they switched from traditional pay TV within the last 12 months.

These latest stats echo Leichtman Research Group findings reported in November.

“Traditional pay-TV services from cable, satellite, and telco providers are now in fewer than two-thirds of U.S households, while an increasing number of households are opting to get live pay-TV from internet-delivered vMVPD services,” says Bruce Leichtman, president and principal analyst for LRG, said at the time. “Consumers continue to choose the video services that best fit their households’ needs. For 60% of households, this includes both pay-TV and SVOD services.”

vMVPDs as a whole were losing subscribers prior to the pandemic’s boosting video consumption, and the absence of live sports and live performances during the COVID-19 pandemic created challenges for the sector.

But the leading vMVPDs, including Hulu + Live TV and YouTube TV, have successfully leveraged advantages in pricing, content and platform flexibility to drive growth, Parks explains.

“Subscriber losses in traditional pay TV continue, while the vMVPD category continues to grow, thanks to consumer price sensitivity and preferences for platform flexibility,” sums up Paul Erickson, senior analyst for the research firm.

The driving factors are consumers’ dissatisfaction with pay-TV pricing and perceived value, combined with the vMVPDs’ ability to deliver targeted content packages through a variety of connected entertainment platforms.

“Traditional pay-TV operators have online delivery in their roadmaps, if not already deployed,” he adds. “We expect vMVPDs will continue to grow dramatically, and will gradually become the dominant offering in the pay-TV landscape.”  

The driving factors are consumers’ dissatisfaction with pay-TV pricing and perceived value, combined with the vMVPDs’ ability to deliver targeted content packages through a variety of connected entertainment platforms.

All of that said, recent increases in vMVPD pricing could alienate consumers, blowing the platform’s long-term prospects, warns Erickson.

“vMVPDs have substantial opportunity if they can avoid the pitfalls that typically drive pay-TV customer dissatisfaction, such as rising prices and inflexible content and platform options,” he says. “With content prices rising and competition increasing, vMVPDs should remain conscious of consumer price sensitivity while keeping a strict adherence to a consumer-centric experience.”