Streaming TV Services Aren't Such a Bargain Anymore

Summary

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WSJ Your Money Briefing: "Streaming TV Services Aren't Such a Bargain Anymore"

Date: July 6, 2020
Host: J.R. Whalen (B)
Guest: Drew Fitzgerald, WSJ reporter (C)

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Episode Overview

This episode tackles the evolving economics of streaming TV services. Originally seen as a budget-friendly alternative to traditional cable, many major streaming TV platforms have recently hiked their prices, prompting consumers to question whether “cutting the cord” still saves money. WSJ reporter Drew Fitzgerald explains the reasons behind these price increases, how companies are justifying them, and what it means for current and prospective cord-cutters—especially during the pandemic era lacking live sports.

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Key Discussion Points & Insights

1. The New Reality of Streaming TV Pricing

• Rising Costs: Many households originally switched to streaming TV to save, as traditional pay TV costs average about $100/month (00:35). Services like YouTube TV and FuboTV, however, are now raising prices—YouTube TV by 30% (to $65/month), and FuboTV by $5 on most packages (01:56).
• Universal Trend: “Virtually every online live TV service that offers these bundles of channels has raised prices.” – Drew Fitzgerald (01:56)

2. Why Are Streaming Prices Increasing?

• Higher Channel Fees: Media companies (Disney, WarnerMedia, etc.) are charging more for their channels, driving up costs for streaming services who pass these hikes on to consumers.
  • “The main is that they say the cost of channels is higher to them, and they're passing that cost on to customers.” – Drew Fitzgerald (02:14)
• Bigger Bundles, More Content: Providers claim customers want more channels, so the base packages (and prices) grow.
  • “Most of the people who subscribe to his [FuboTV's] service show that they want more channels and they want a bigger bundle.” – Drew Fitzgerald (02:32)

3. The Surprising Effect of “Streaming Wars”

• Less Competition on Price: Intense competition drives down prices among on-demand services (Netflix, Disney+, HBO Max), but not so for live TV streaming.
  • “The market for live TV is different…there hasn’t been as much competition on price over the years in that particular market.” – Drew Fitzgerald (03:11)
• Willingness to Pay: Those remaining want live news and sports must pay a premium; those uninterested have already left or will soon.
  • “Those that have stuck around are willing to pay a premium for it.” – Drew Fitzgerald (03:41)

4. Consumer Backlash and Streaming Companies’ Response

• Shrinking Savings: As streaming prices near traditional TV rates, the value proposition is eroding.
  • “A lot of the prices for these online TV packages are slowly drifting towards where the prices are for a traditional cable or satellite TV package.” – Drew Fitzgerald (03:58)
• Flexibility Remains: Streaming still appeals due to no long-term contracts and easy cancellation—YouTube TV highlights this as a main feature.
  • “If you don't like it, you can always pause your service and it's easy to disconnect.” (04:37)

5. Are Cord Cutters Regretting Their Choice?

• Mixed Feelings, No Major Regrets: Price increases force a reckoning, but most who leave cable don’t return.
  • “I don't know if regret would be the right word, but...these price hikes have really driven cord cutters...to make up their minds.” – Drew Fitzgerald (05:18)
  • “The pay TV industry is shrinking faster than ever this year and most people who have decided to cut the cord...are not coming back.” (05:54)

6. Pandemic Impact: Live Sports Void

• Sports Drives Value: Online live TV packages justify premium prices by offering sports; without them, some cancel altogether.
  • “If they don't offer sports, they're really in a different bucket and they can compete on price.” – Drew Fitzgerald (06:12)
• Temporary Churn: Many cancel in the absence of live content, but sports fans may return when leagues resume.
  • “There's still going to be a base of people who...will see this through till the end of the summer when some of these leagues are going to come back with games. But it’s definitely going to hurt those services.” (06:39)

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Notable Quotes & Memorable Moments

“Virtually every online live TV service that offers these bundles of channels has raised prices.”
– Drew Fitzgerald, 01:56

“The cost of channels is higher to them, and they're passing that cost on to customers.”
– Drew Fitzgerald, 02:14

“The market for live TV is different. If you want to watch live sports or have a favorite TV news channel…there hasn’t been as much competition on price.”
– Drew Fitzgerald, 03:11

“There’s still a savings compared to most traditional packages, that’s for sure. And these companies will point out that there’s a lot more flexibility and user friendly interfaces.”
– Drew Fitzgerald, 04:12

“The pay TV industry is shrinking faster than ever this year and most people who have decided to cut the cord on live TV are not coming back.”
– Drew Fitzgerald, 05:54

“Most of these services are lowering prices. The ones that carry sports, those prices keep going up.”
– Drew Fitzgerald, 06:12

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Timestamps for Important Segments

• [00:35] Traditional cable bills vs. streaming: initial savings
• [01:56] Recent price hikes: YouTube TV, FuboTV, and others
• [02:14] Causes of rising streaming costs
• [02:59] Live TV streaming vs. on-demand streaming competition
• [03:58] Customer sticker shock and streaming value
• [05:18] Cord cutter sentiment and industry trends
• [06:10] Pandemic's effect on live sports and streaming subscriptions

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Conclusion

The landscape for streaming TV has shifted. With prices steadily approaching traditional pay TV and the added challenge of live sports interruptions during the pandemic, cord-cutting no longer guarantees significant savings. Yet, flexibility and contract freedom continue to set streaming services apart. As providers adapt, consumers are forced to reassess the real value of streaming—especially if their primary motivation was to save money rather than simply escape cable's confines.

Transcript

[A]

Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday SAP Netsuite operate like a local everywhere. Visit d e l.com WSJ that's d e e l.com WSJ.

[B]

Here's your money briefing for Monday, July 6th. I'm J.R. whalen for the Wall Street Journal. The average U.S. household spends about $100 a month for a traditional pay TV package. Over the past few years, that's pushed millions of Americans to cut the cable TV cord and sign up for leaner, cheaper services that offer TV over the Internet. But many of those services aren't so cheap anymore.

[C]

These streaming TV companies really broke into the market over the past four years, promising really low prices for some of the same sorts of channels that you would get from your cable or satellite TV company for 80 $100 more. Their answer has basically been take it or leave it.

[B]

So is cutting the cord as good a deal as it used to be? And how are streaming services dealing with the lack of live sports during the pandemic? Our reporter Drew Fitzgerald will be here with answers after the break. Last week, Google raised the cost of its basic YouTube TV package by 30% to $65 a month. Plenty of other services offering TV over the Internet have done the same thing, and that means smaller savings for Americans who chose to cut the cord. Our reporter Drew Fitzgerald is here to Discuss. So Drew, YouTube TV isn't the only streaming service to raise its prices recently.

[C]

That's true. Another service that's focused on Sports, called FuboTV, also is set to raise its price by about $5 for most packages later this summer. And if you look back over the past two years, virtually every online live TV service that offers these bundles of channels has raised prices.

[B]

So why are prices going up?

[C]

Well, these companies give a couple reasons for why prices are going up. The main is that they say the cost of channels is higher to them, and they're passing that cost on to customers. There are plenty of examples of major media companies, whether they're Disney or WarnerMedia, owned by AT&T, or others raising the price that they charge other TV companies to carry their channels. Another reason is that these companies simply can I Talked to the CEO of FuboTV who said that despite what some people say, most of the people who subscribe to his service show that they want more channels and they want a bigger bundle. They've shown that by the amount of time they spend watching tv.

[B]

You know, we hear about the so called streaming wars and you think the competition would lead to lower prices for consumers, but it really hasn't. Why is that?

[C]

There are a couple reasons. One is because there's a real difference between streaming TV and streaming video. If you look at on demand services that have pre recorded sitcoms, movies, TV shows and the like from Netflix or Disney plus or HBO Max, which you can download, prices for those are generally going lower and they offer a lot of content because there is a bit of a war, a price war among these companies to get users attention. The market for live TV is different. If you want to watch live sports or have a favorite TV news channel, you can get that from a few different places. But there hasn't been as much competition on price over the years in that particular market. And part of the reason for that is the companies that offer these channels know that people who aren't interested in live sports or live TV have already left, or if they haven't, they're probably going to leave soon. And those that have stuck around are willing to pay a premium for it.

[B]

And there's got to be some sticker shock from customers. How are the streaming companies dealing with that?

[C]

So a lot of the prices for these online TV packages are slowly drifting towards where the prices are for a traditional cable or satellite TV package. And that's led a lot of people to realize that they're not saving that much money when they use these services. Now. There's still a savings compared to most traditional packages, that's for sure. And these companies will point out that there's not just savings, but a lot more flexibility and user friendly interfaces that they bring to the table that some of the older legacy TV packages don't offer. These streaming TV companies really broke into the market over the past four years, promising really low prices for some of the same sorts of channels that you would get from your cable or satellite TV company for 80, $100 more. Their answer has basically been take it or leave it. YouTube TV, for example, said, we realize that this is a shock to some people and we want to offer more flexible options. And YouTube TV reminded its customers in its last blog post that if you don't like it, you can always pause your service and it's easy to disconnect. Which is one of the things that has really made some of these services appealing compared with cable or satellite tv, where you're often locked into contracts and have to sit on the phone for a long time just to disconnect.

[B]

Are cord cutters feeling any regret? You know, does cable seem like a better option these days?

[C]

I don't know if regret would be the right word, but there's a sense that these price hikes have really driven cord cutters or those considering whether they should cut the cord to make up their minds. This is really spurring people who might be a little price sensitive and can't afford to shell out 50, 75, 100 bucks a month on channels that they might not watch very much to decide to ditch it. And when it comes to people who have decided to ditch cable or satellite TV but use online services like Fubo or YouTube TV, there is a compelling argument, especially among cable companies that bundle their products with Internet service, that those people can come back. But to be clear, the pay TV industry is shrinking faster than ever this year and most people who have decided to cut the cord on live TV are not coming back.

[B]

Now, you mentioned sports and live sports in particular as part of the equation here. How has the pandemic affected that?

[C]

Well, the one common thread among almost all of these online live TV services is that they offer sports. If they don't offer sports, they're really in a different bucket and they can compete on price. And most of these services are lowering prices. The ones that carry sports, those prices keep going up. Now, as we know, over the past few months, there's been practically nothing to watch on tv. So that's forced a lot of customers to not only cut the cord but ditch their online TV service because there's nothing left for them to watch anymore. Now, there's still going to be a base of people who like having the channels, the sports channels available for them for the full season. They like having it around and they'll see this through till the end of the summer when some of these leagues are going to come back with games. But it's definitely going to hurt those services.

[B]

All right, that's Wall Street Journal reporter Drew Fitzgerald. Drew, thanks for coming on the show.

[C]

Thanks for having me.

[B]

And that's yous Money briefing. I'm J.R. whalen for the Wall Street Journal.

[A]

Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already workday SAP Netsuite operate like a local everywhere. Visit d e l.com WSJ that's d e e l.com WSJ.