More pay-TV providers integrating services like YouTube TV


Frontier Communications announced it will make vMVPD (note: virtual multichannel video programming distributor) YouTube TV its primary video service, integrating YouTube TV billing into subscriber bills and offering discounts for the first year, according to TechInsights Research. Although Frontier is a small to mid-sized company, this is still an important step in the bundling of Internet and video services, allowing providers to still profit from Internet and video bundles while beginning to remove spiraling content licensing costs from their balance sheets.

This decision by Frontier will primarily affect new subscribers. While existing subscribers to Frontier's hosted video service have the option to switch to YouTube TV, Frontier will continue to support its existing video service, at least for the time being.

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TechInsights North America Pay TV Benchmarking reports that the top 17 U.S. pay-TV providers (96% - 98% of U.S. pay TV subscribers) lost 6.07 million subscribers in the past year. Excluding vMVPD providers such as YouTube TV, Hulu+Live TV, and Fubo, pay-TV providers lost 7.93 million subscribers in the past year alone.

As pay-TV subscribers continue to decline, more and more pay TV providers, particularly Tier 2 and Tier 3 providers, are replacing their hosted services with third-party OTT pay TV services such as YouTube TV, Hulu+Live TV, and Fubo, and bundling these services with their Internet services. In this way, they can focus on the more profitable business of broadband (and many wireless providers).

OTT pay-TV services are more likely to profit from video services as they expand nationwide, while cable operators and telcos are constrained by the physical footprint of their plants. In the U.S., OTT pay-TV has a potential market of more than 125 million broadband households, of which only 13.2% currently subscribe to OTT pay-TV services. This number is bound to grow as more service providers replace their internally managed TV services with third-party OTT pay-TV services.