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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