COMMENTARY

SVOD Vs. Traditional Pay TV: Do You Get What You Pay For?

• by Wayne Friedman , Staff Writer, December 11, 2019

TV consumers are looking for a deal. Is the $12.99 deal for Disney+, Hulu (on-demand) and ESPN+ that deal? How about the $4.99/month offer for Apple TV+?

The current disruption of the traditional pay TV industry continues to excite, and for others, discourage.

Consumers hope streaming will eliminate the expensive TV service price, which costs most of them $100 to $150 a month.

Bringing that down to a $15/month price tag seems too good to be true. Well, Tom Rutledge, CEO of Charter Communications, says there is a lot more to it.

During the UBS Media Conference, Rutledge said: "When you add them all up, [it's] a lot of money. ... The [pay TV] bundle is very expensive, and the dis-aggregated a la carte repackage [emphasis here] product is even more expensive."

That’s the fear: That the business is breaking down only to be built up, reconfigured at a bigger price tag. Is that what consumers want?

Right now, Rutledge says many of these discounted packages don’t have much in the way of live sports or 24-hour news. “So there are a lot of reasons why those products aren't going to satisfy the full needs of television consumers.”

Be forewarned: Increasingly, many of the broad-based virtual pay TV services, looking to replace cable, satellite and telco pay TV products, have already start to raised their prices -- including AT&T Now (formerly DirecTV Now) Sling TV and Hulu+Live TV.

The reasoning is easy to figure out -- no one is making any money from this stuff. Profit margins are razor thin -- if at all.

Rutledge points to one reason why: Those big content producers. The major studios heading into the D2C (direct to consumer) business do lot of business with traditional pay TV companies, like cable operators.

“Our ability to sell that product is ultimately constrained by our relationship with content [companies]. We have to manage that in terms of the kinds of power the content companies have."

More troubling: Rutledge also blames the pure glut of content and multiple ways of getting it. Another financial issue: Consumers are increasing just doing more password-sharing.

It’s that time of season. Everyone is looking for a deal.