Cord Cutting Isn’t The Future Of TV — It’s Cord Shifting

In January 2015, Dish launched what was then billed as an “online skinny bundle” service. Called Sling TV, the service offered a handful of channels for as little as $25/month, and a whole new way to watch TV—online only.

Three years later, Sling has been joined by a slew of competitors—DirecTV Now, Sony Playstation Vue, Hulu Live TV, YouTube TV, FuboTV, Charter Spectrum Stream, Comcast Watch and several new new offerings due out this year as well.

Now known by the unwieldy title vMVPDs (virtual Multichannel Video Platform Distributors, to distinguish them from set top box based pay-TV companies, or regular MVPDs) these services are no longer quite so skinny and they’re poised to take over the world.

Or the world of television, anyway.

TV Everywhere For Everyone

In 2011, several cable providers introduced something they called “TV Everywhere”—linear TV that viewers could watch on their tablets and smartphones and laptops that served as a virtual extension of the services they had via their set top box—DVR and VOD included. It was a natural response to the fact that this feature, also known as “quantum viewing” (the ability to stop watching on one device and pick up exactly where you left off on another) was a key selling point for Netflix and other ad-free subscription services that were threatening the cable companies’ livelihood.

Unfortunately, the TV Everywhere apps were promptly shut down by the TV networks for complicated legal reasons having to do with digital rights and the need to make additional payments to actors, writers and producers.

What followed was an era where the already outdated interfaces on most pay TV services started to seem even more antiquated as Netflix, Amazon and Hulu rolled out better and much more user-friendly experiences. This in turn lead to higher levels of frustration with pay TV overall, due to something we call “paying Nordstrom prices for Kmart service”—consumers were paying over $100/month for a service whose frustrating user experience looked like it had not been updated since Friends and Seinfeld were on the air.

Even though many of the vMVPDs are owned by traditional pay TV companies, their digital nature means they don’t have these issues. Their interfaces are modern, new ad shiny, and frequently driven by a library-based system that asks “what do you want to watch?” as opposed to “what’s on TV now?”

In addition, because they are digitally-based, vMVPDs are available on every type of device imaginable—smartphones, tablets, streaming devices, computers—and you can watch them, and the programs you’ve saved to your cloud DVR—from the train on the way to work, from a hotel room or from your in-laws.

In other words, TV Everywhere.

Mesomorph Bundles

Photo: Getty Images

While most of the vMVPDs offer a low-priced skinny bundle option, their sweet spot seems to be the “mesomorph bundles” of around 80 to 100 channels for around $45-$60/month, depending on how much cloud DVR storage you want and whether you opt for HBO or other premium channels.

Except for instances where vMVPDs have not managed to strike deals with specific network groups (e.g., CBS and Sling), the average viewer will be hard pressed to name a network that’s missing from their 80-channel bundle. What’s gone are all those very small niche networks most people have never heard of—Baby First, American Heroes Network and the like. All the most popular broadcast and cable channels—and then some—are included for a price that’s less than half of what the viewers was likely paying. Set top box rental fees alone could run to $30-$40, depending on the number of TVs in the house.

Why They Are Poised To Win

To use our earlier analogy, vMVPDs offer Target value for Target service—the price and the level of service feel like they’re related and both the price and the service are actually quite good.

vMVPDs provide viewers with most every channel they want, a modern interface that looks the same across devices and isn’t tied in to a time-based linear grid: modern viewers time shift and the services (to varying degrees) acknowledge that.

What’s more, the services are getting better all the time. In the early days, many local broadcast stations refused to sign up with the new vMVPDs as they thought they wouldn’t attract enough customers and/or cut into their profits. As vMVPDs have both proliferated and succeeded in signing up millions of viewers, the affiliates have starting to come around: Hulu Live TV currently has 521 affiliates signed up and other services are not far behind.

The other problem the vMVPDs faced—where network groups refused to sign up with various services—is starting to recede as well. Networks and network groups are realizing that it’s in their interests to be on every vMVPD out there, reaching the largest number of viewers possible. Holding their service back from a network like Sling that reaches 2 million viewers winds up hurting CBS far more than it does Sling, and we can expect these instances to resolve themselves over the next two or three years.

Winners, Losers and Double Plays

vMVPD services that are owned by companies that provide broadband are in the best position going forwards. That’s because they can offer “double play” and “triple play” bundles to consumers, greatly reducing the combined cost. They can even make it so that a new broadband customer basically gets the vMVPD service thrown in for free. (At least for the first 18 months.) Why? Because broadband in the U.S. is a monopoly service in much of the country and so anyone who wants high speed broadband has to buy it from the local cable company or telco. 5G mobile broadband will change that equation considerably, but it will be at least two or three years before 5G is a real factor.

Hulu Live TV is also in a good place because it’s owned by four of the largest networks in the U.S. (ABC, Fox, NBC and Time Warner.) And since ABC is owned by Disney and NBC is owned by Comcast, that puts Hulu in a great position both content and distribution-wise. Add in the fact that subscribers get Hulu’s increasingly popular service as part of their overall package and they’re definitely looking like a winner.

YouTube TV, on the other hand, is in a tricky position. It has no network or cable company connections and no one in the TV industry trusts their parent company Google—they think Google is out to steal all their data and ad revenue. That said, the industry also realizes the power of YouTube and its Millennial and Gen Z audience, so I wouldn’t write them off completely.

Cord Shifting, Not Cord Cutting

One final note on vMVPDs. When your friends dump their local cable company—and all those set top boxes and cable wires—for a vMVPD, they are not “cutting the cord.”

They’re still paying money every month for the ability to watch television. Often to the very same company they were paying for all those set top boxes and wires. What they’re doing is called “cord shifting”—they’re still getting pay TV, but instead of it coming in via wire and cables, it’s coming in via modems and broadband internet. It’s a minor but critical difference, and further proof that while TV is changing, it’s far from dead.

“If you know anything about television, you probably know Alan Wolk.” That’s how Adweek describes the best-selling author of Over The Top. How The Internet Is (Slowly But Surely) Changing The Television IndustryWolk currently serves as Lead Analyst for TV[R]EV.