- August 14, 2018

When Linear TV and Digital Collide: The Rise of the Virtual MVPD

Susan Engleson
Susan Engleson
Senior Director, Products

Over-the-top (OTT) adoption is on the rise, increasing 17 percent year-over-year. With such astounding growth, it isn’t a surprise that the industry is buzzing about OTT and how it is impacting other traditional channels. But more than anything, the rise of OTT has highlighted how these channels – linear TV and digital – are converging. Virtual MVPDs, in particular, are a prime example of viewers utilizing digital mediums to watch live content formerly only available on linear TV.

The Virtual MVPD Explained

One of the most common questions I received during Comscore’s recent “State of OTT” presentation was, “What is a virtual MVPD?” Let me take a moment to explain.

MVPD stands for multichannel video programming distributor (yes, it’s quite a mouthful). What that means, in layman’s terms, is a service that provides multiple television channels – a.k.a. a cable or satellite television service like Comcast, DirecTV, DISH, Cox, etc. These were often formerly known as “operators” or “MSOs.”

A virtual MVPD (vMVPD) is a service that provides multiple television channels through the internet without supplying its own data transport infrastructure (i.e. coaxial cable, fiber, or satellite technology). These services are also sometimes called “skinny bundles” as they often contain fewer channels than a traditional cable or satellite subscription. You may be familiar with some vMVPDs such as Sling TV, DirecTV Now, PlayStation Vue, Fubo, Philo, YouTube TV and Hulu Live.

Then there is what I call “pure-play” vMVPDs. These are the services that are exclusively vMVPDs, excluding services like YouTube and Hulu that have substantial non-linear, digital-only content such as user videos and original programming.

The Next Frontier of Linear Content is OTT

It’s not surprising in the age of the rapidly expanding video ecosystem that consumers expect to be able to watch whatever they want, whenever, wherever and however they want. Traditional linear TV has long been a mainstay for providing quality content that viewers love, and OTT provides a dynamic environment in which viewers can experience this content on their own terms. It just makes sense that the two worlds are colliding.

In fact, over the past year, we’ve seen concrete indicators that more and more users are gravitating toward linear TV on OTT via virtual MVPDs:

  • Virtual MVPD use is still small but growing rapidly. In April 2018, 5 percent (4.9MM) of U.S. households with Wi-Fi internet streamed a pure-play vMVPD on their television screen. This is a remarkable 58 percent increase in households from the year before.
  • OTT viewers are spending significantly more time watching vMVPDs. Pure-play vMVPDs comprised 10 percent of all time spent on OTT streaming in April – a notable 53 percent increase year-over-year indicating that, not only are more users giving vMVPDs a try, they are highly engaged with them as well. In fact, nearly half of the time spent by OTT households with a vMVPD service is spent with the vMVPD itself.

  • vMVPDs are being adopted by more than just the younger generations. In April 2017, 29 percent of households using a pure-play vMVPD had a head of household under age 35. In just one year, that percentage dropped eight points to only 21 percent, indicating a higher number of older viewers are now using vMVPDs.

  • Households using pure-play vMVPDs are super users of OTT in general. OTT households using a pure-play vMVPD service in April 2018 spent an average of 128 hours streaming OTT content, substantially more than the overall average OTT usage of 54 hours per household. When you consider that about half the time that OTT households using a vMVPD service spend streaming is on the vMVPD itself, that still leaves 64 hours per month streamed on other services. That’s still nearly 20 percent higher than the average monthly household time spent. Additionally, the average OTT household using a vMVPD service uses more than one-and-a-half times more OTT services than the average OTT household (6.1 vs. 3.8, respectively).

Live Content is Here to Stay on OTT

Given the competitive price points and low barriers to entry for consumers (no installation required), I anticipate that we will continue to see significant growth in virtual MVPDs in the years to come. Both Hulu and YouTube launched their services in 2017, so they are still in their infancy and have significant growth potential. In fact, it’s likely both services will well exceed one million users each this year. This would put vMVPDs at more than seven million users total – nearly one-third the number of households with satellite.

What does this all mean for traditional TV? The behavior of MVPDs in regard to digital is a prime example of the industry trying to stay ahead of the curve. Some traditional MVPDs have embraced digital with a virtual MVPD offering of their own (e.g. Dish has Sling TV, DirecTV has DirecTV Now). Many others are testing or have announced plans for a virtual MVPD offering indicating that they take this trend seriously.

Additionally, we've seen cable companies adding the ability to access Netflix, a digital service, on a cable box. It may be that future generations do not distinguish between a streaming box and a cable box at all – there will just be one place consumers go for their entertainment. Today, all the industry players want to position themselves to become that core entertainment source.

For networks, it’s important to understand that while their traditional linear audience is shifting, that doesn’t mean they have fewer viewers overall. Their viewers are just watching in different places and it’s important to measure this consumption across platforms/distribution channels – including vMVPDs – to get the complete picture of audience behavior.

For more information about how Comscore can help you measure the dynamic OTT space, please contact us.