The VMVPD: Cable’s Answer To Cord Cutting

jordandecker"On TV And Video" is a column exploring opportunities and challenges in advanced TV and video.

Today’s column is written by Jordan Decker, associate director of video investment and Horizon Advanced at Horizon Media.

Consumers have been loud and clear about how the traditional cable bundle model does not serve their needs, which has fueled cord cutting – or cord evolving – in recent years.

As a result, we’ve seen the emergence of the virtual multichannel video programming distributor (vMVPD), which has forced the industry to redefine what it means to “cut the cord.”

A vMVPD acts in the same way as a traditional cable or satellite provider but delivers linear television via an internet connection rather than a hard-wired set-top box. This means a household can receive linear cable and network content with a subscription but without the cord – does this make that household a cord cutter as we know it? Since Nielsen includes vMVPDs in its cable household universe estimates, the simple answer is no – this household is not a cord cutter.

Then how will the rise of vMVPD change the cable landscape as advertisers know it today?

Advertiser Impact

In the near term, the effect of vMVPDs is small in both subscriber scale and advertising opportunities. Today’s vMVPDs players, also called “skinny bundles,” include PlayStation Vue, DirecTV Now and Sling TV, with YouTube TV and Hulu planning to enter the game later this year. The market for pay TV delivery is dominated by the top five providers: DirecTV, Comcast, Charter, Dish and Verizon; vMVPDs fall in line with the long tail of TV providers making up the remaining approximately 20% of total subscribers.

The power of the vMVPD to change the television advertising landscape rests mostly in future capabilities from internet-delivered linear television. The technology allows for dynamically inserted and potentially addressable ads to be served on a one-to-one basis. Today the opportunity for advertisers is the full linear ad-load streaming associated with live content and the two minutes of ad time per hour that vMVPDs own and sell just like the traditional MVPDs do.

In today’s television landscape we know people are viewing more content than ever, and the vMVPD will continue to blur the line between live linear and on-demand content. The effect of live and all VOD content coming through the same physical input on the actual hardware should not be discounted. This will push all content providers to make more of it available in on-demand environments alongside the live-linear experience. There is a definite potential upside for both content providers and advertisers as the viewing model continues to evolve.

Consumer Implications

The arrival of the vMVPD or “skinny bundles” has not, however, quite solved the cord-cutting issue from a consumer perspective; between the cost of a broadband connection and stacking a vMVPD with an SVOD service, the cost can quickly add up to close to or more than $100, the national average for pay TV plus broadband service.

These vMVPD services do provide inroads for competition in the pay-TV service arena that have not existed historically. Traditional MVPDs will be either challenged to provide a similar service and cost or to launch internet-enabled delivery within their own ecosystem to keep pace with the landscape.

Similar to cord cutting in general, vMVPDs have been louder than their actual effect on the television landscape. So, what now? Marketers should stay the course on their current video or television approach with a keen eye on the future that will be heavily fueled by the technology that vMVPDs can provide.

Follow Horizon Media (@HorizonMediaInc) and AdExchanger (@adexchanger) on Twitter.

 

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