Investors know that, when it comes to video entertainment, streaming is the future. Legacy pay TV services were put on notice more than a decade ago when Netflix kicked off its on-demand streaming service; more recently, cable and satellite giants have faced challenges from live TV streaming services. But being on the right side of history isn't a free ticket to financial success, and Sony (SNE +1.12%) is learning that the hard way. Sony's live TV streaming service, PlayStation Vue, has struggled early. Can it hold on much longer in a crowded market full of powerful players?
Reasons to believe in PlayStation Vue -- and reasons not to
Right from the start, PlayStation Vue seemed to have plenty of advantages. It was among the first skinny bundles to debut on the market: only Dish's Sling TV beat PlayStation Vue to a nationwide live TV streaming debut. PlayStation Vue has the backing of a big company in a space where such backing is essential to absorbing losses -- the most successful skinny bundles are earning only the leanest profits, while most are actively losing money. And PlayStation Vue had an early competitive advantage in the form of its cloud DVR service, which Sling TV and other services were slow to match.
Image source: Getty
But PlayStation Vue has disadvantages, too. Its clumsy branding implies a connection to Sony's PlayStation family of video game consoles. While it's true that PlayStation Vue first debuted on PlayStation consoles, the service is now available for streaming devices from companies like Roku and Amazon. With skinny bundles still a new concept to so many consumers, PlayStation Vue can't afford branding that sends a muddled message.
In 2016, PlayStation Vue was unable to cut a deal to keep Viacom-owned channels on its platform. Viacom owns popular properties like Comedy Central and MTV, and channels like those are key to convincing cable lovers to jump ship or full cord-cutters to try a new type of pay TV. The timing was terrible: AT&T entered the skinny bundle fray in 2016 with its popular DirecTV Now service, and several other new skinny bundles arrived in 2017.
PlayStation Vue has also lost pricing battles at every turn. PlayStation Vue's cheapest bundle used to cost $39.99. That was comparable to Sling TV's $40-per-month combo bundle, but Sling TV offered half-sized bundles at $20 and $25 per month, respectively. DirecTV Now charged $35 per month for its cheapest bundle when it arrived on the scene.
Price hikes saw Sling TV's $20 bundle turn to $25 and DirecTV Now's $35 bundle turn to $40, but by then PlayStation Vue, too, had hiked prices: its cheapest option became $44.99, more than comparable options from Sling TV, DirecTV Now, and newcomers like Hulu with Live TV ($39.99) and YouTube TV ($40).
Through all of this, PlayStation Vue offered a five-day free trial in a market where week-long trials were the norm.
The result of all of these disadvantages? Some very, very ugly numbers.
PlayStation Vue's numbers should make investors wary
It's no secret that skinny bundles tend to lose money, so the fact that PlayStation Vue is in the red is not alarming. But the degree to which PlayStation Vue is running up the tab, and the lack of subscriber growth that Sony has seen for its money, should be unsettling to investors.
PlayStation Vue has more than 500,000 subscribers. That's a solid base, but it pales in comparison to Sling TV's 2.2 million. Other services, including ones that PlayStation Vue got a head start on, are also topping PlayStation Vue's subscriber numbers.
| Skinny Bundle | Debut Year | Last Reported Subscriber Count |
| Sling TV | 2015 | more than 2,200,000 |
| PlayStation Vue | 2015 | more than 500,000 |
| DirecTV Now | 2016 | more than 1,800,000 |
| Hulu with Live TV | 2017 | nearly 1,000,000 |
| YouTube TV | 2017 | more than 800,000 |
None of these services are exactly printing money, but those with higher subscriber counts have a reason to suffer through an early market where profits are slim or nonexistent. The skinny bundle market's current leaders have reason to believe they'll be left standing when profits finally start appearing (though that could still be a long way off for some).
But those who lag behind -- including PlayStation Vue and start-up fuboTV, which has not released subscriber figures since last fall -- are paying the costs without gaining much hope in return. Those costs are serious. Alphabet's YouTube TV is reportedly losing $9 per subscriber per month.
Estimates pegged PlayStation Vue's per-subscriber content costs at within $5 of its old $39.99 per month price. Even with a new $44.99 price tag on its smallest bundle, PlayStation Vue can't have much left over for its other expenses after content costs are taken out. By most estimates, PlayStation Vue is losing money and has been all along.
Image source: Getty
PlayStation Vue may not be burning money quite like YouTube TV is, but it also lacks YouTube TV's subscriber growth. Without the bright future that subscriber growth suggests, why should Sony keep investing in a space where profits are so dear?
Can PlayStation Vue survive?
Only one major skinny bundle -- CenturyLink's CenturyLink Stream -- has folded so far. PlayStation Vue may be next.
Sony CEO Kenichiro Yoshida has pushed back against rumors of PlayStation Vue's demise. That may bode well -- but, on the other hand, it's never a good thing when a company has to assure observers that it won't kill off one of its businesses. And Yoshida's defense of PlayStation Vue -- that it provided "valuable consumer spending data" -- does not inspire much confidence in PlayStation Vue as a future giant of live TV streaming.
PlayStation Vue's struggles have been documented for some time, so an eventual shuttering of the service is arguably already baked into Sony's stock price. A surprise comeback for the service would be a nice boost for Sony; a final reckoning, perhaps, would not be proportionally devastating.
But a comeback for PlayStation Vue seems prohibitively unlikely absent major changes. Investors should keep an eye out for major rebranding efforts or significant changes to pricing or features; absent that, PlayStation Vue is probably destined for failure.
