Next year could be a watershed year for over-the-top video providers, with UBS Securities estimating that virtual multichannel video programming distributors (V-MVPDs) could attract as many as 15 million subscribers by 2020.
In a research report from its UBS Evidence Lab, UBS estimated that two top OTT providers – SlingTV and Sony’s PlayStation Vue, have already attracted more than 1 million customers. With additional offerings from DirecTV Now – expected in the fourth quarter – and Hulu – slated for an early 2017 debut – coming soon, the numbers are expected to add up, according to UBS.
“Over time, we expect V-MVPDs to be able to innovate faster than traditional distributors,” UBS wrote. “This is not unlike DBS service, which began as an inferior product but eventually took the lead from cable in terms of new product development. Ultimately, while we expect V-MVPDs to start out attacking from below, we see them moving up market over time as any kinks in Internet distribution are worked through.”
UBS expects most of those customers to come from satellite TV and telco TV customers. In the report, UBS estimated that total pay TV subscriber declines will reach 4.5% in 2018 and almost 6% by 2020, up from 2% in 2016. Cable will be less impacted, UBS estimated, mainly because of the $20 per month penalty for customers that unbundle video from broadband service.
UBS expects-MVPDs to appeal mostly to value-conscious, younger, urban residents, the segment that is usually seen as most likely to cut the pay TV cord.
As part of its research, the UBS Evidence Lab also interviewed about 2,000 pay TV customers, gauging their interest in a virtual MVPD service. According to UBS, 37% of pay TV homes – and 57% of pay TV homes with Netflix – said they were likely to consider a virtual MVD service. About 76% of likely cord-cutters said they would consider a V-MVPD.
