Who Wins in a Stabilizing Skinny Bundle Market?

Live TV streaming services, or "skinny bundles," have had a dramatic effect on the cord-cutting landscape since their debut. There's been plenty of drama within the skinny bundle space, too. In just a few short years, we've seen handfuls of new competitors emerge to vie for superiority in features, pricing, and channel selection -- all three of which have been in near-constant flux. Big marketing budgets and rollouts have been the norm, as has a churning ecosystem of free trials, cancellations, and customers who hop from service to service.

But now, the skinny bundle market finally seems to be taking a breather. Most of the major players are in place, subscription churn is steady (if a bit high), and features, channels, and platform support have more or less equalized across the biggest services. With skinny bundles' primordial chaos in the rearview mirror, now is the perfect time for investors to take stock of where the major skinny bundles stand.

A Brief History of the Skinny Bundle Wars 

It's worth remembering how we got here. Skinny bundles are still a strikingly new idea: the first major ones rolled out nationally in 2015. Dish's (DISH) Sling TV and Sony's (SONY -1.68%) PlayStation Vue were the first skinny bundles to become widely available, but they were not alone for long.

AT&T (T 0.19%) entered the fray in 2016 with its own service, DirecTV Now. It was soon followed by fuboTV, which pivoted from its soccer-focused roots to become a more typical skinny bundle, as well as by Hulu's Hulu with Live TV, CenturyLink's (NYSE: CTL) CenturyLink Stream, Google's (GOOG 0.56%) YouTube TV, and start-up Philo. At the same time, rumors swirled of new services planned by Apple, Amazon, Verizon, and others.

The gold rush in the skinny bundle market meant that companies pushed hard for subscribers and sales leads. New services debuted with large marketing budgets and robust affiliate programs (affiliate programs offer a payoff to individuals and companies who refer customers to the company behind the program).  Discount offers and device bundles were everywhere. Bigger and bigger companies were arriving.

Price points were variable: Sling TV offered stripped-down bundles at $20 and $25 per month apiece (though the price of its two bundles when combined -- $40 per month -- foreshadowed the market's eventual consensus point). DirecTV Now offered its smallest bundle at $35 per month. CenturyLink Stream charged $45 per month. fuboTV charged either $39.99 or $44.99 per month for the same branded bundle, depending on which area of the country the subscriber was in!

Features and channel selection were uneven between the services, too. Latecomers exposed Sling TV's lack of local channels by adding live local feeds of major networks like ABC, CBS, Fox, and NBC. PlayStation Vue's cloud DVR feature was, for a time, the only one of its kind.

It was a messy, chaotic market. Some services, like PlayStation Vue, struggled; others, like Century Link Stream, failed.

A Stabilizing Skinny Bundle Market

The skinny bundle market is still quite young, and there may be growing pains yet to come. But most evidence indicates that the chaos that defined 2015, 2016, and particularly 2017 is finally subsiding.

In 2018, no major skinny bundles have debuted. One (CenturyLink Stream) has folded. Apple gave up on its skinny bundle dreams in 2017, opting instead to make its TV app aggregate other services. Amazon, too, killed off its skinny bundle plans. In 2018, Verizon appeared to do the same. For the first time since 2015, the script does not call for a major new player to take the stage.

Image source: Getty

Subscription churn for these services is very high -- 50%, dwarfing the steady 19% seen by SVOD services like Netflix and Amazon. That indicates that there are still consumers hopping from free trial to free trial, but the churn rate has been around long enough to become a fact of the marketplace, at least in this early stage. It may not be good news, but it's not chaos.

Prices have evened out across the space: $40 to $45 is now the narrow window occupied by most entry-level skinny bundles. DirecTV Now's cheapest bundle is now $40 per month, not $35. Some previously $40-per-month services, like PlayStation Vue, have hiked the price to $45 per month, but no major service has gone higher than that with its entry-level bundle. (As for going lower than $40 per month, Sling TV still offers two $25-per-month bundles, but each is missing a few major channels -- only by combing them will get you a typical skinny bundle selection. When you get both, Sling TV charges $40 per month. Philo is the only true exception here, but their model is unique and, in many ways, experimental.)

Features have equalized. More services have added cloud DVR features, erasing what was once a differentiator for PlayStation Vue.  Channel selection, too, is now fairly standard. Major skinny bundles now offer most, if not all, major networks, including live local feeds in select markets. Most also have a similar array of regional sports networks (RSNs).

Frantic periods of spending are subsiding. DirecTV Now recently ended its affiliate program, and other companies, including Sling TV, have slashed payments to their affiliate marketing partners. 

The market is fluid, of course -- the music hasn't stopped and the dancers are not frozen in place. But, if the skinny bundle market is indeed stabilizing, and that certainly appears to be the case, now is an excellent time to consider where everyone stands.

The Skinny Bundle Market's Best- and Worst-Positioned Companies

Chaos favors the lucky, but a more stable market will be welcome news to the skinny bundles that are on top right right now. So which companies are those?

The subscriber edge in the skinny bundle market currently belongs to Sling TV and DirecTV Now, who together have more subscribers than their next four competitors combined.  

Reports of PlayStation Vue's struggles are certainly borne out by a look at the subscription numbers, especially considering the head start it had over many of its competitors. It's worth noting that fuboTV's numbers date to 2017, but that fuboTV has not been willing to share numbers since. Philo has also declined to publically share subscriber numbers. 

Skinny Bundles and Market Positioning

Skinny bundles with the backing of deep-pocketed companies also seem well-positioned to last if today's status quo remains. Skinny bundles may be stable, but they're not particularly profitable, at least not yet. YouTube TV is losing money. PlayStation Vue is, too. Sling TV is less cost-effective than Dish's old satellite model. Conditions are stable in the skinny bundle market, but business is not good: it seems prohibitively likely that some of these skinny bundles will fail, and having the ability to weather longer periods of losses or minimal profits gives services backed by major companies an advantage. Companies like fuboTV, a start-up, don't have as much breathing room.

Structural problems also look a bit more permanent right now. PlayStation Vue has long had clumsy branding -- in a space where winning over the technophobic can turn cable subscribers into customers, PlayStation Vue is plastered with the name of a video game console (it works just fine on devices like Roku and Fire TV, of course, but its branding invites the uninitiated to fear that it doesn't). fuboTV's name, left over from its days as a soccer-focused service, isn't the best either.

Where the Skinny Bundles Stand

The services that should be sweating right now are those that have the fewest subscribers, the least funding, and the biggest losses. That's common sense, and common sense -- thanks to a stabilizing market -- finally seems to matter in the skinny bundle space.  That's bad news for the companies currently on the bottom of the heap.

Things can still change in this market, which is young by business standards. However, after years of chaos, investors are finally looking at a market with some sense of order. Consider the current status quo to be the preseason odds: there are games yet to be played, but -- on paper, at least -- we know which companies have the advantage.