During an interview with The Desk last year, Orby TV CEO Michael Thornton made a dire prediction for over-the-top streaming services that offered live cable channels for a fraction of the price compared to traditional cable and satellite services: If those Internet-based offerings wanted to become profitable or remain solvent, they would have to raise prices.
“I think people are getting much more focused on unit economics,” Thornton said, speaking of the per-package price distributors like cable, satellite and over-the-top services were expected to pay in exchange for the rights of channels. He said consumers were becoming more aware of just how expensive those channels were to distribute thanks to a wave of carriage disputes and price increases that had become common across the pay TV landscape and were starting to impact once-cheaper offerings by streaming companies.
“The unit economics of competing against a Comcast or a Charter are very, very difficult,” Thornton said. “I’m not surprised if Hulu or YouTube TV loses money with every subscriber they add — whether they think they’ll be able to make that up with lower prices in the future, that’s unclear, but in the current form, they lose money with every customer they bring into their platform.”
On Tuesday, that uncertainty became a little more clear after YouTube TV announced it would immediately hike its one-size-fits-all offering of around 80 streaming local and cable channels to $65 a month, a sharp increase from its previous price of $50 a month and nearly double its launch price of $35 a month just three years ago.
Since it launched in 2017, YouTube TV has been more aggressive than others in adding channels — first by folding in networks offered by AT&T’s WarnerMedia (CNN, TBS, TNT), then Discover Networks and finally ViacomCBS channels, the latter announced over the summer.
The addition of Viacom’s MTV Networks to YouTube TV was not unexpected following the programmer’s merger with CBS Corporation last year. Analysts and industry experts expected YouTube TV and other distributors who previously offered either CBS channels or MTV Networks would have to soon offer both or lose either.
Tuesday’s price hike was not also unexpected: For weeks, social media users in various Facebook groups and Reddit threads had predicted YouTube TV would raise the price of their offering with the addition of the Viacom cable networks, but predictions on how much the company would soon charge varied across the board.
Most felt that a $5 to $10 increase per month was likely. Their predictions were largely based on competitor Philo’s offering of Viacom networks alongside channels from other programmers, including AMC and Discovery — two companies that also offer channels to YouTube TV. With programmers and distributors often not disclosing the per-channel or per-package cost associated with offering pay TV networks to consumers, customers are left to calculate some estimations on their own.
So Tuesday’s announcement that YouTube TV would increase its price by $15 a month came as a shock to most subscribers who felt the fee hike was too much to ask, especially since YouTube only added eight new channels (though the company said additional channels were forthcoming).
“I just don’t know why they went from a curated popular 35 channels to 85 channels of mostly the same unwatchable garbage that got so many people to leave cable, and nearly doubled the price by doing so,” one Reddit user complained.
Many upset social media users are now looking to competitors for cheaper options — but those options could be hard to come by. Disney’s Hulu with Live TV offers many of the same channels at a cost of $55 a month, but users have complained that their DVR offering is not up to par with other services. AT&T TV Now costs the same $55 a month, but it only offers 45 channels in its base package and its cloud DVR service is limited to 500 hours over 90 days. (Disclosure: As of June 2020, the author of this post owns stock in AT&T.)
Sling TV comes out as one of the cheapest offerings at $30 a month, but it’s missing some local TV stations and only offers 10 hours of cloud DVR storage per month. Users have to choose between Sling Blue (which has Fox and NBC stations) or Sling Orange (which has ABC and Disney Stations), though they can combine both packages into a $45 a month offering.
Many are instead looking to the sports-packaged Fubo TV as an alternative which boasts over 100 channels of TV programming and 500 hours of cloud DVR for $60 a month. That puts it just under YouTube TV by $5 a month, but it currently doesn’t have ESPN or any of the other ABC or Disney channels. That will soon change as the provider recently signed an agreement to bring those channels to subscribers, but some are wondering if the trade-off will include a price increase much higher than what YouTube TV is offering.
Some are also considering Philo, a cheaper streaming service that includes the Viacom networks but lacks sports and traditional news channels, has managed to hold steady in recent years: It eliminated a lower-cost $16 a month package but has managed to keep its base package at $20 a month while adding national networks like Sony’s Get TV and add-on bundles from Starz and Epix. In a conversation with The Desk shortly after Viacom and CBS merged, a Philo executive said he was not too concerned at the time about how a combined ViacomCBS would impact the service since Philo’s contractual agreement with the programmer were locked in for the long term.
For its part, YouTube TV says it believes the $65 a month it is now asking subscribers to part with reflects the value of what it’s offering.
“We don’t take these decisions lightly, and realize how hard this is for our members,” a YouTube TV executive wrote on Tuesday. “That said, this new price reflects the rising cost of content and we also believe it reflects the complete value of YouTube TV, from our breadth of content to the features that are changing how we watch live TV.”
The executive went on to say that YouTube TV offered unlimited cloud DVR storage with access to recordings for nine months as well as the ability to stream live and recorded TV on a huge number of supported devices — all of which is offered without hidden taxes and fees that have become a staple of cable and satellite television.
But consumers are starting to do more mental math, and they’re quickly realizing that streaming TV may be more expensive for their needs than signing up for a cable or satellite and Internet package the old fashioned way.
“Since we have to buy internet, bundling TV is surely less than $65,” Mahmoud Hafez, the co-founder of the corporate compliance service DocuVision AI, wrote on Twitter. “It also feels crazy that the price has just about doubled in last 2 years.”
“After that price hike YouTube TV is now more expensive then regular ass cable TV in my area,” another Twitter user wrote. “Time to cancel YouTube TV, I guess.”
On its most-recent earnings call, an executive with Google, YouTube TV’s parent company, said the subscription service had more than 2 million paying customers. In the coming months, it’ll be interesting to see how that number increases or decreases.
