Sonys New Cord-Cutting PlayStation Vue Has 1 Big Problem

By Markets Fool.com

Continue Reading Below

Source: Sony

After years of being ignored, cable cord-cutters and streaming-TV consumers are now more popular than the homecoming queen. Individual TV networks are offering, or soon will offer, streaming-only services to woo the cord-cutting lot.CBS'All Access and Showtime andTime Warner's HBO are joining incumbent Hulu Plus (collectively owned by Comcast/NBCUniversal, 21stCentury Fox, and ABC/Disney) to offer streaming content for a monthly fee.

Obviously, buying a single network's offering only gets you access to one batch of content. And at a cost range of $5.99 per month (CBS) to $15 per month (HBO), making your own streaming bundle becomes an expensive undertaking. In the end, pay TV seems a better value, with the FCC reporting in May 2014 that basic cable servicecost $22.63 per month on average and expanded basic cable $64.41 per month.

But while single-network options don't offer a great value, bundled streaming services are perhaps a better deal for consumers. Most notably, DISH Network's Sling TV and now Sony's PlayStation Vue are competing for the streaming set with rival live TV offerings. But there's one problem for the latter: it's still too expensive.

$50 per month for streaming-only television?
The big difference between Vue and Sling is the number of channels. DISH's base offering includes only 16 channels, while Sony offereda more ambitious content selection of roughly 50 channels. Of course, additional content costs more -- $50 per month for the Vue base package, compared to just $20 per month for the Sling TV base package.

Continue Reading Below

Based on the FCC's numbers, that makes PlayStation Vue just $15 per month cheaper than expanded basic cable. (It should be noted that expanded basic cable costs $0.49 per channel on average, while Sony costs roughly two times that amount per channel).

One must also consider the "equipment costs" associated with the new product. While Dish's Sling TV only needs a computer and the Internet, Sony's offering requires users to have the PlayStation 3 or PlayStation 4 in order to get the service. TheWall Street Journal reported the service is set to come to iPads as well, but isn't available yet.

Why aren't we having this conversation?
You can't really fault Sony for the product, but it appears the service has run into a key complication facing most pay-TV providers: exploding content costs. The reason many are cutting the cord has little to do with the delivery format and everything to do with pay-TV costs that as of last year had increased at more than four times the rate of inflation since 1995. This has enriched networks, actors, and sports figures at the expense of Joe Q. Subscriber. Unfortunately, Sony's Vue has done nothing to change this trajectory and provide real value to subscribers.

The greater conversation we should be having about pay-TV options is how networks, sports leagues, and providers can work together to slow exploding content costs. Unfortunately, it doesn't appear anyone wants to address the content-cost bubble. As an example, the famous-for-being-famous Kardashians recently inked a $100 million television deal for four seasons of their eponymous E! network show. If you have cable, you're (probably) paying for that.

As far as the new Vue service goes, it appears to be Sony's attempt to generate incremental revenue and profit from hard-core gamers and not a bona-fide attempt to provide solutions to cord-cutters and streamers. As such, it will not be the panacea cord-cutters are hoping for.

The article Sonys New Cord-Cutting PlayStation Vue Has 1 Big Problem originally appeared on Fool.com.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.