31 MAR 2021

HOW HAS THE VIRTUAL PAY-TV MARKET MAINTAINED AN UPWARD TREND?

Parks Associates' digital event, "Future of Video: Explore vMVPDs and New OTT, Pay-TV Strategies" explores the increasing popularity of VMVPD services have taken over the pay-tv landscape. By 2023, the market is projected to surpass satellite TV and telco services, falling in second place behind cable services.

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Parks Associates hosted a virtual presentation as part of its “Future of Video: OTT, Pay TV, and Digital Media 2021” to discuss how vMVPDs have evolved from key players in the industry such as Vidgo, Frndly TV, Philo, ViacomCBS, and Tivo, among a few other companies.

The researcher's recent findings indicate the evident slow but steady growth the VMVPD market has made, revealing that 43% of US broadband homes are most likely to switch to a VMVPD service. In comparison, 45% of traditional pay-TV subscribers plan the same. The average US household has doubled their monthly OTT service spending to nearly $20. Consumers ages 35-50 and over 50 have also become more dependent on digital streaming services for entertainment. Over 70% of Genz and millennial audiences are streaming new releases at home instead of movie theaters.

According to the President & Co-founder of VIDGO, Shane Cannon, the online streaming TV service has achieved its growth from the 55 million reported pay-TV cord cutters, many of which have shifted to digital services search of lower prices and more diverse content. Specializing in news, sports, and local, the service also saw a revenue spike following the removal of its free trial. By 2023, VMPD subscribership is projected to surpass satellite TV and telco services, falling behind cable services.

One of the biggest challenges faced by VMPD services is subscriber retention. Despite the industry’s growth, services have seen a churn rate of over 40% and an average subscription duration of a year to 15 months, shorter than typical pay-tv subscriptions. The churn rate's largest reasons include a lack of a contract and limited content, among others. Some of the retention measures VMPDS has applied to its business model include free upgrades, subscriptions hold, quality customer service, regular content additions, and digital service bundles.

While some VMVPD services such as VITGO have seen success upon specializing in news, sports, and localized channels, others such as Philo prioritize customer service, diversified catalogs, various language offerings, and quality acquisitions. Varying payment methods, a large number of compatible devices, and the addition of social/watch part features have also contributed to the market’s upward trend. Ads continue to be the largest revenue driver for the platforms. With 90% of total viewership occurring inside a household, the increasing number of families who consume media together has also majorly contributed to the ad value, allowing advertisers to target more audiences at a time.