U.S. Virtual Pay-TV Subscriptions Hit 13.6 Million in 2021, YouTube TV Led with 39% of Subscribers

As more and more consumers cut the cord, virtual pay-TV seems look like the logical way to fill the gap left by the content they are leaving behind. These virtual pay-TV services — also known as virtual multichannel video programming distributors (vMVPD) — allow viewers to watch broadcast and cable channels online without a cable or satellite subscription.

According to new research from Omdia’s TV & Online Video Intelligence Service, the average virtual pay-TV user utilized 13.5 video services per month during 2021 compared to the average traditional TV household which used 7.4. These services include anything from YouTube to Netflix to cable streamers and more. At the end of the year, there were 13.6 million virtual pay-TV subscriptions in the U.S., representing approximately 11% of households.

YouTube TV is one of the leading drivers of this type of service, accounting for 39% of total virtual pay-TV users as of April 2021 according to Omdia. However, YouTube TV had only 26% of total vMVPD subscriptions; at the end of last year, the streamer boasted an estimated 4 million subscribers while its biggest competitor Hulu Live TV surpassed it with 4.3 million subscrbers as of Q4.

Currently, Sling TV (2.49 M) and fuboTV (1 M) are the only other virtual pay-TV services with more than one million subscribers. Philo currently has 800K and DIRECTV STREAM has 646K.

The higher proportion of users to subscriptions is likely due to multiple households sharing one virtual pay-TV subscription. Unlike pay-TV, many virtual pay-TV services offer multiple profiles, which encourages password sharing. According to LendingTree, nearly four in 10 Americans share streaming login information with friends, family, roommates, and others.

In addition to the convenience factor, splitting a vMVPD subscription across multiple households brings down the cost of virtual pay-TV that consumers are often afraid to get locked into.

While sharing subscriptions may initially seem like a negative for service growth, it has proven to be quite the opposite for YouTube TV. While there is a gap between the percentage of users and subscriptions, both still remain strong in the U.S., meaning that the ease of sharing the service might contribute to the rise of both users and, ultimately, paid-subscriptions.

In 2021, traditional pay-TV subscriptions saw a 7% decline in the U.S., ending the year with only 69.7 million households to watch TV via cable or satellite. Omdia’s analysis also shows that of the 125.1 million TV households in the U.S., 55.4 million do not have any type of traditional linear experience.

Sarah Henschel, Principal Analyst at Omdia, said, “Because virtual pay-TV services are internet-based and have no long-term contracts like traditional pay-TV, user interfaces and experiences are received well and can adapt to changing customer needs.”

Henschel added, “[vMVPD] users are more than twice as likely to use transactional video services (both retail and rental), with this growing to 3x as likely for premium video on demand (PVOD) and more than 5x for sport pay-per-view (PPV). Virtual pay-TV users are also almost 3x as likely to have pirated video content. This over-indexing highlights that these consumers are content-hungry and are able to find the content they need—through paid means or otherwise.”

Virtual pay-TV users are also younger than the average pay-TV and SVOD (subscription video on demand) user, meaning that they are most likely more tech-savvy than older users and therefore more likely to be cord-cutters.

Max Signorelli, a senior analyst at Omdia, also commented, saying, “U.S. virtual pay-TV users skew toward high income 25 to 44-year-old males with interest in TV shows and sports. Live sports is one of the driving growth factors behind virtual pay-TV, but it is still niche in size compared to pay-TV or SVOD.”

Omdia found that while U.S. virtual pay-TV accounted for 7% of subscription revenue, it only makes up 3% of total subscriptions. Although vMVPD users are highly engaged, price hikes continue to push consumers to stick with cheaper SVOD or AVOD services. While the average monthly pricing for a vMVPD service in the U.S in 2021 was $58.89 per month, traditional pay-TV was $99.44 and only $8.75 for SVOD.

While virtual pay-TV looks to offer affordable subscriptions to the consumer, the economics of the business model still operate in a similar way to traditional pay-TV. Virtual pay-TV services must still pay carriage fees to channel owners in order to license content. Channel groups often bundle multiple channels together during negotiations to force services to pay high-margin prices for licensing, including for channels that consumers otherwise would never pay for.

This explains why companies in the U.S. that are having the most vMVPD success are often backed by large conglomerates and content creators allowing them to offset operational costs in house. For instance Hulu Live TV, which is primarily owned by Disney, is currently at the highest price point ($69.99), yet comes with free access to Disney+ and ESPN+, a valuable and attractive deal that consumers can’t get anywhere else.

Another reason that Disney can price their Hulu Live TV service at that price is because it offers all of the major networks such as A&E, Comedy Central, [Discovery Channel], Food Network, Fox, HGTV, NFL Network, and more.

Similarly, YouTube TV (owned by Google) is $5 cheaper than Hulu Live TV, but has more top channels than any competitor at this price and is one of only two streamers with local PBS stations.

The vMVPD industry has struggled to find profitability with small margins causing U.S. average pricing to double from 2017 to 2021.