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Over-The-Top (Prices)

Pricing Out OTT Packages Shows Value Of The Bundle: Analysts 3/30/2015 8:00 AM Eastern
TakeAway

An analysis of how much over-the-top services cost and what they offer suggests cord-cutters might not be getting the value they think they are.

The debate around over-the-top services has heated up recently as new players like Sling TV, Sony’s PlayStation Vue and HBO Now join existing subscription video-on-demand services like Netflix, Hulu and Amazon Instant Video. But as consumers have more options to cut the pay TV cord, the discussion boils down to one key point: Price.

 

Several analyst s have chimed in already. Recently, Sanford Bernstein media analyst Todd Juenger held two focus groups that showed what cable, satellite and telco TV operators have been saying all along: There is value in the bundle.

 

According to Juenger’s admittedly sparse sample — the focus groups in New York and San Francisco polled about 34 at-risk cord-cutters between the ages of 21 and 38 — once confronted with the reality of cord-cutting, most see it is more expensive than a standard cable/Internet package.

 

Despite the hype, OTT packages off er a severely limited number of channels, and most don’t have all of the sports — both cable and broadcast — that younger viewers seem to crave. Even non-sports fans are left out in the lurch, having to subscribe to several packages or services to satisfy even the most basic entertainment needs. Factor in the price of a standalone broadband connection, and the total cost approaches a standard double- or triple-play pay TV subscription.

 

“We remain cautiously optimistic that cord-cutting, in large numbers, isn’t likely to happen,” Juenger wrote. “It’s one of those ideas that sounds great in the abstract but crumbles when faced with the reality.”

 

MoffettNathanson analyst Craig Moffett in a recent note to clients said that while on the surface none of the OTT offerings appear to be game changers — packages are too small and the ultimate price is too high — the industry is at an inflection point.

 

“From here, we will see a steady stream of innovation that makes forecasting a challenge,” Moffett wrote. “The Orcs of OTT are storming the pay TV citadel. They will keep coming.”

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