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DirecTV Now, Sling TV, and PlayStation Vue price hikes: The cost of more bloated bundles

Bad news: Live TV streaming prices are going up. Good news: This isn't cable all over again.

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If you've dropped cable or satellite TV in favor of a live TV streaming service, the past week might've brought some bad news.

First, Dish Network announced a $5 per month price hike for its Sling TV Orange service, which is currently the cheapest way to get ESPN without cable. The new price ($25 per month) will apply to new subscribers immediately, and to existing ones in August. (Sling TV Blue plans, which offer NBC- and Fox-owned channels but not ESPN or other Disney-owned channels, still cost $25 per month, and a combined Orange and Blue package still costs $40 per month.)

A few days later, AT&T announced a $5 per month price hike for all DirecTV Now plans from July 26 onward, bringing the base monthly price to $40 for all subscribers. PlayStation Vue subscribers weren't spared, either: All multi-channel Vue plan prices will increase by $5 per month for new subscribers starting July 24, and for current subscribers after July 31, bringing the base price to $45 per month.

It's tempting to view these price hikes as a sign of some impending squeeze on cord-cutters, as companies like AT&T and Dish Network try to recoup their losses in the traditional TV business. But in reality, rising prices have become inevitable as TV streaming bundles pack in more channels to reach the broadest possible audience. These bundles may still be a better deal than cable for a variety of reasons, but the factors that led to the past week's price hikes aren't going away anytime soon.

The competition paradox

I used to believe that the rise of live TV streaming services would lead to smaller, cheaper, and more flexible bundles. With more competition, I figured TV services would face greater pressure to keep prices down, and would avoid working with programmers that sought too much money for their channels.

This has occurred to some extent. PlayStation Vue, Hulu with Live TV, and YouTube TV all omit channels from Viacom. Hulu and YouTube also don't include channels from Discovery, and Hulu lacks channels from AMC. (Those three networks, incidentally, have banded together to back a sports-free streaming bundle called Philo, and some of their channels are also part of a new sports-free service from AT&T.) FuboTV, meanwhile, omits ESPN to make room for other channels in its sports-centric streaming bundle.

But as more competitors have entered the field, pressure has also started to come from the opposite direction: To avoid losing business to other bundles, streaming TV services have been bulking up their channel lineups.

In March, YouTube TV added channels from Turner Networks and raised its price to $40 per month, up $5 per month from before. Last fall, DirecTV Now added CBS channels, possibly contributing to this week's price hikes. FuboTV has added channels from AMC, Scripps, CBS, and others over the past year, ballooning its monthly price from $35 to $45. And in explaining its own price increase, Sling TV CEO Warren Schlichting pointed out that Sling Orange now offers more than twice as many channels as it did in early 2015. Over time, he said, the costs to carry those channels "only go in one direction, and that's up!"

At the same time, most live TV streaming services have been racing to add local affiliate feeds from major broadcast networks such as ABC, CBS, NBC, and Fox. While those feeds allow viewers to watch live sports and other important events in more markets, Schlichting recently estimated that local channels can add $12 per month a typical pay TV bill.

The pressure to pack in more channels isn't likely to go away. At a recent industry conference, Viacom CFO Wade Davis expressed optimism that its channels would wind up in YouTube TV and in Hulu's live TV service, and FuboTV CEO David Gandler has said that he'd like to add ESPN and Turner channels. The latest wave of price hikes could give those companies cover to add more channels and raise prices accordingly. Instead of collapsing, as I'd hoped, streaming TV bundles are just getting bigger.

Why streaming bundles are still better

Despite the gloomy outlook, live TV streaming services aren't in danger of becoming a worse deal than cable or satellite TV.

Even after the current wave of price hikes, live TV streaming services are generally much cheaper than the average traditional TV bill. For packages that include major broadcast networks, regional and national sports coverage, and major news networks, the price for live TV streaming still floats around $40 to $50 per month. That's less than half the average $106 that U.S. homes spent on traditional TV service last year, according to Leichtman Research Group.

Why the disparity? For one thing, live TV streaming services still face much more pressure to keep costs down, both from each other and from standalone options like Netflix. As a result, they're charging less money up front, and hoping to earn more over time through targeted advertising, additional features, or add-on services. Ditching cable or satellite TV also means eliminating set-top box rental fees, which can quickly add up if you're watching on more than one television.

At the same time, traditional TV service isn't immune to the price hikes that are now affecting streaming services. This year, almost every major TV provider, from Comcast to Dish to DirecTV, raised prices on cable and satellite service. If anything, price hikes are more common on the traditional TV side, where customers are less likely to go through the ordeal of cancelling service.

And while cable companies and telcos may still try to lock customers in with attractive bundle deals on internet and TV service, new kinds of bundles are now emerging to offset the cost of streaming TV. AT&T, for instance, offers $15 per month off DirecTV Now when paired with its new unlimited wireless data plans.

Admittedly, it's disheartening to see streaming TV bundles get more bloated and expensive over time, because that's exactly what people have been trying to escape for so long. But compared to cable--and all its sneaky fees, contracts, cancellation hassles, and other baggage--those bigger streaming bundles are still an improvement.

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