Cord-Cutters Beware: Streaming TV Prices Are Marching Higher
Cord-Cutters Beware: Streaming TV Prices Are Marching
Higher
Sling TV and DirecTV Now raised rates over the summer;
DirecTV plans another increase this year
By Drew FitzGerald Sept. 14, 2018 12:50 p.m. ET
The online-only television bundles that have lured away
cable-TV customers with rock-bottom prices might not stay that low for long.
AT&T Inc.’s DirecTV Now streaming service recently
raised its basic channel plan by $5 over the summer, bringing its starting
monthly cost to $40. Chief Executive Randall Stephenson this week said the
company is considering additional price increases for the service.
“We moved the price up and, being a very price-sensitive
market, we fully expected to see a considerable number of customers drop off,”
Mr. Stephenson said in an interview Wednesday. “We haven’t seen that. The
consumers, it’s obvious that they’re finding value in the platform.”
Streaming services like DirecTV Now, Sling TV,
PlayStation Vue and YouTube TV added millions of customers last year by
promising big savings over traditional cable and satellite-TV subscriptions.
Sling sold its channel package for $20.
DirecTV Now’s basic price is “for the long haul probably
still too low,” Mr. Stephenson said. He said the service has been unprofitable,
and the company wants to steer the most frugal customers to its slimmer WatchTV
service, which carries no sports channels and is profitable.
Mr. Stephenson said WatchTV could offer a range of
packages from $15 to $25 a month to appeal to more people. “We’ll exit this
year with a very different looking portfolio,” he said.
Market leader SlingTV this summer raised the price of its
basic package by $5 to $25 a month, with its owner Dish Network Inc. blaming
higher channel programming fees.
“Our team works hard to negotiate fair programming deals,
with the goal of keeping your price as low as possible,” Dish executive Warren
Schlichting said in a blog post. “Programming fees, however, only go one
direction, and that’s up!”
The price increases reflect how skinny TV bundles are
getting girthier as they add more channels. A Sling TV spokeswoman said the
company plans to add more channels from Discovery Inc. later this year without
raising prices.
Alphabet Inc.’s YouTube TV service, which carries cable
channels and went live last year at $35 a month, raised its monthly price to
$40 earlier this year after it tacked on additional channels like TNT and TBS.
The higher prices have also narrowed the value gap
between new and traditional TV, since cord-cutters must still pay for broadband
service. Cable-TV packages still cost more than their online imitators, though
cable companies often charge higher rates for standalone broadband service as
an enticement to bundle internet and video.
For example, Comcast Corp.’s website currently offers new
customers a bundle with 125 TV channels and broadband service for $70 a month
for 12 months, rising to $90 in the second year of the 2-year contract. For a
broadband-only service, with a slower internet connection, Comcast’s starting
price is $40 a month, rising to $75 after 12 months.
Price increases at the low end of the live TV market
aren’t deterring new customers. More than 9 million subscribers will be using
streaming services by the end of this year, growing to 24 million by 2022,
according to estimates from investment bank UBS AG. A UBS survey found most
customers had switched to the services to save money.
“The fact that consumers can’t afford the [traditional
cable-TV] bundle is the main issue,” said Charter Communications Inc. Chief
Executive Tom Rutledge this week at a Goldman Sachs Group investor conference.
Still, he said the idea that the traditional cable TV market is “falling apart”
is overblown.
“The traditional model is gradually declining,” he said.
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