Streaming price hikes make it less of a cheap cable alternative
YouTube TV and ESPN+ both raised their prices Tuesday, even though both packages rely on live sports rights to entertain consumers, and the pandemic has shut down live sports.
Why it matters: Streaming services and so-called skinny bundles promised to provide a cheaper alternative to the old cable television package. These price hikes suggest that price advantage won't hold.
Driving the news: YouTube TV is raising its prices by $15 monthly, bringing its total monthly price to $65. That's nearly double what the service cost when it initially rolled out in 2017 for $35 monthly, and nearly on-par with what a cheap cable bill could cost, depending on the provider.
- YouTube blamed the price increases on adding new channels to its lineup, like PBS and Discovery Network brands, including HGTV and Food Network.
- Recognizing that the steep increase may be a problem for consumers, especially as many of them are suffering financially from the coronavirus pandemic, YouTube parent Google said in a statement that "we understand that some of you may choose to pause or cancel your membership."
By the numbers: Google said in February that YouTube TV had 2 million subscribers. By comparison, Comcast — the biggest cable provider in the U.S. — has around 20 million cable subscribers.
- The price hikes won't apply to existing monthly subscribers or users who bought the ESPN+ full-year plan upfront, but they will apply to new month-by-month subscribers beginning in August.
- While ESPN+ doesn't offer subscribers all of the same access to the marquee sports games they get on ESPN cable channels, it does market live programming, including some exclusive live rights, as a big part of its value proposition. But many live sports are going to remain cancelled come August.
FuboTV, a skinny bundle that was created as a cable replacement with a focus on sports, recently raised the price of its family bundle is increasing from $60 to $65 a month after adding a bunch of Disney channels, including ESPN, ESPN 2, and ESPN 3.
The big picture: Every few months, one of the major streaming services lifts its prices, forcing all of its competitors to follow suit.
- Before consumers even realize what has happened, they're paying double for the same service they signed up for a few years ago, with a few more programs added to it.
- The services blame the price hikes on program additions or increased programming costs, and most consumers are left to decide whether it's worth it to keep the service or move on.
Be smart: Data shows that streaming television, because of programming and pricing inconsistency, is not likely to make up the revenue the TV industry loses as cable television declines unless it consolidates. The pay-TV world has always done so, with four big cable players, Comcast, Charter, Dish and AT&T, dominating.
The bottom line: As the streaming television industry evolves, it's matching the trajectory of the bloated cable industry that it's trying to replace. That means consumers shouldn't expect much of a break on their television costs.