$20 Sling TV by Dish Network Will Test Theories about Potential Streaming Markets

Dish Network, at long last, is launching a $20-a-month TV streaming service that notably includes ESPN and 11 other channels.

Sling TV is the first stand-alone streaming service that does not require a prior subscription to a linear video service, and importantly will include ESPN. That matters because, up to this point, live sports programming has been known as a “firewall” against greater cord cutting. Pre-recorded video is available from the major streaming services and from some of the networks directly.

But live sports have been unavailable in a streaming service. So ESPN will provide a major test of live sports exclusivity on linear subscription services, and the ability of live sports to glue subscribers to linear video.

Sling TV will offer live feeds of sports, news and scripted shows on TVs, computers and mobile devices, with programming  from ESPN, ESPN2, TNT, ABC Family, Food Network, HGTV and Travel Channel as part of the 12-channel package.

But, so far, no broadcast TV networks or the most-watched cable news channel, Fox News, are part of the package.

The $20 Sling TV base package features add-on packs with additional kids and news programming, available for $5 each.

Most observers would say a package including the major local TV networks plus sports and perhaps HBO is the likeliest candidate for a winning, but stripped-down, streaming package. So the Sling TV will not be a full test of that thesis.

Still, the availability of ESPN is a big deal, as it attacks the “live sports firewall” that most believe props up demand for linear TV services.

Dish is betting that Sling TV will prove attractive to Millennial consumers not interested in traditional linear video packages. But the package also might appeal to families with children.

To be sure, some studies suggest Millennials actually buy linear video subscriptions at a higher rate than often assumed. Some 62 percent to 65 percent of Millennials surveyed by Deloitte in 2012 reported they bought subscription TV services and had no plans to change.

Other studies suggest a significant minority of Millennials do not buy linear TV services, though.

Sling TV will test the theory that “skinny” packages of programming will satisfy some consumers unhappy with the traditional linear packages, unwilling to spend so much on linear video and more willing to watch streaming content, especially when consumers can receive over the air programming directly on their TVs.

How Many Linear Video Subs Did Dish Network Lose in Recent Quarter?

Parsing numbers sometimes is a challenge when looking at subscriber gains and losses in the consumer telecom business.

An illustration: how many subscribers did Dish Network gain or lose in its second quarter of 2015? And did HBO lose linear video subs when it launched HBO Now, the stand-alone streaming service?

Dish Network reported losing 81,000 video subs in the quarter, about double the loss of 44,000 subs in the same period of 2014.

But its actual loss of satellite TV customers may have been more like 151,000, according to MoffettNathanson.

The reason is that Dish Network included gains from the over the top Sling TV service in its basic subscriber count.

Dish Network gained 70,000 Sling accounts in the quarter.

When we launched Sling TV, Dish Network expected to get subscribers from three categories, cord-nevers (people who never have bought any subscription video product), cord-cutters (former linear video subscribers) and supplementers who buy linear video and also Sling TV.

“The vast, vast majority of the subscribersthat we take on do not currently have Pay-TV at the time they subscribe to Sling TV,” said Roger Lynch, Sling TV CEO.

That suggests most of the Sling TV net adds are not coming from the ranks of linear video subscribers. But the combined figures also obscure the extent of Dish Network linear video subscriber losses.

HBO says less than one percent of HBO NOW subscribers are former HBO linear subscribers who dropped the linear service to subscribe to HBO Now.

As with Dish Network's Sling TV service, it appears that new subscribers to the over the top subscribers are not cord cutters. 

They are, as Dish Network hoped would be the case,  “cord nevers,” those who never have purchased cable TV.

A broader shift from linear to streaming still is coming. But, at the moment, the linear providers seem to be succeeding at attracting brand new consumers to their OTT services. 

Full Video Cord Cutting Remains Relatively Rare, So Far

Just 55 percent of Millennials use TVs as their primary video entertainment viewing platform, according to a research study sponsored by NATPE and Consumer Electronics Association.

On the other hand, only about 2.7 percent of U.S. households (across every age group) actually do not buy a linear video subscription service, but do buy high speed access, considered to be an indication those households are reliant solely on streaming video services.

As you might expect, Millennials (in this case defined as those 13 to 34) are significantly more likely to consume full-length TV programs from a streaming source (84 percent streamed in the past six months) than live TV programming at its original air time (54 percent), or recorded content from a DVR (33 percent).

About half of Millennials say they watch TV programming on a laptop, and for 19 percent, it’s their preferred TV viewing screen.  About 28 percent watch television on a tablet and 22 percent on a smartphone.  

While 90 percent of all TV viewers say they watch on a television set, about 85 percent of Millennials say they do so. But some would argue full video cord cutting remains relatively rare.

But challenges keep coming.

Dish Network, at long last, is launching a $20-a-month TV streaming service that notably includes ESPN and 11 other channels.

Sling TV is the first stand-alone streaming service that does not require a prior subscription to a linear video service, and importantly will include ESPN. That matters because, up to this point, live sports programming has been known as a “firewall” against greater cord cutting. Pre-recorded video is available from the major streaming services and from some of the networks directly.

But live sports have been unavailable in a streaming service. So ESPN will provide a major test of live sports exclusivity on linear subscription services, and the ability of live sports to glue subscribers to linear video.

Sling TV will offer live feeds of sports, news and scripted shows on TVs, computers and mobile devices, with programming  from ESPN, ESPN2, TNT, ABC Family, Food Network, HGTV and Travel Channel as part of the 12-channel package.

But, so far, no broadcast TV networks or the most-watched cable news channel, Fox News, are part of the package.

The $20 Sling TV base package features add-on packs with additional kids and news programming, available for $5 each.

Most observers would say a package including the major local TV networks plus sports and perhaps HBO is the likeliest candidate for a winning, but stripped-down, streaming package. So the Sling TV will not be a full test of that thesis.

So far, linear video, as a business, has only plateaued, and begun what looks like the declining part of its life cycle. The real shift is yet to arrive.

Consumers Might Find Bundles A Good Deal, Eventually

Precisely what is happening in the linear video and over the top subscription businesses is unclear, even if most observers would agree the business clearly is in slow decline.

Paradoxically, consumers might eventually find that video bundles--even mostly linear--provide more value than a la carte streaming "channels" and services.

To be sure, strains in linear video are growing. In fact, by about 2020, smaller U.S. cable TV companies are going to experience zero profit margins on their linear video programming businesses, according to the American Cable Association.

Some would argue Verizon Communications likewise will have a hard time earning a profit on its own widespread investment in fiber to home networks, at least in part because revenue from new services has been less than anticipated.

Meanwhile, profit margins for linear video, in particular, have been rather low, Verizon now maintains, though in the past Verizon has claimed it earned good margins on video entertainment.

It would be going too far to argue video service providers are aggressively taking the bundle apart. It would be fair to say they are taking unprecedented steps to control costs, either by shrinking bundles or replacing expensive networks with cheaper apps.

Nor is the linear video business declining fast. 

The biggest U.S. linear video subscription providers lost about 125,000 subscribers in 2014, on a net basis. Within the category, AT&T and Verizon gained about a million customers, while cable TV operators lost about 1.2 million accounts, on a net basis.

On an installed base of 95 million accounts, that barely registers, a tenth of one percent over a year’s time.

Of course, it is worth noting, the number of accounts does not speak to average revenue per account, or account profit margin, higher retention and acquisition costs, or other measures of segment health.

Presumably, those metrics are under pressure.

With the upcoming launch of HBO Now and Sling TV, we might see some indication of whether the rate of change--in terms of abandonment of linear subscriptions for over the top subscriptions--is about to increase.

But we might eventually find that cord cutting has demand more limited than many suppose. The reason is that cord cutting might not save most consumers money, and that arguably is the key attraction.

Some consumers buy a linear video subscription, plus Amazon Prime and Netflix. In other words, monthly spending is at about the $100 a month level. By switching to Sling TV and HBO Now, and keeping the other services, a consumer might replace an $80 linear subscription with an alternative $20 Sling TV subscription plus $15 a month for HBO Now, a savings of possibly $45 a month.

But that assumes the buyer is content to lose lots of channels. And the thing about linear video consumers is that each of us tends to watch only about a dozen channels, and perhaps only about seven on a regular basis.

Each consumer will evaluate how many of those "most watched" seven are sacrificed, to get lower recurring prices. If not, the consumer has to calculate the cost of obtaining them on a streaming basis. At a hypothetical cost of $10 per channel, those seven represent $70 a month in costs.

For some consumers, Sling TV represents none of the most-viewed channels. For others, Sling TV will represent a few of the most-watched channels. In other words, it isn't clear that unbundled streaming costs less than bundled linear service.

True, the ability to watch your subscription content “on any Internet-connected device” is valuable. But that probably will stop being a “unique” value at some point, when most content is available from one or more online sources, on an on-demand or subscription basis.

At that the point, the issue is going to be “cost,” compared to value. And it remains exceedingly hard to envision how a full on-demand business case will lead most consumers to pay less. In fact, they almost certainly will face higher costs for an a la carte approach.

Hulu and YouTube TV Might be Among Biggest Streaming Winners

Hulu and YouTube are among the bigger winners in streaming video by 2022, Business Insider predicts. Sling TV and Playstation Vue are among the big losers. We might note that both Hulu and YouTube TV are anchored by their “live TV” (linear)  content.

We sometimes forget that the legacy subscription TV business (cable, telco, satellite TV) is itself an amalgam of “live” and “pre-recorded” content. The paramount examples of “live” content being “sports and news;” the best example of pre-recorded content being movie services.

In the streaming era we will see lots of niches recreated out of legacy content formats, including services that emphasize pre-recorded content; some that emphasize “live content” (sports networks, news) and many that recreate in a streaming format today’s mix of channels.

The “live streaming” segment of the market will include the specialized sports and news venues, plus what we tend to call “skinny bundles” of channels that resemble subscription TV but offer fewer channels.

Some services, including Netflix, might continue to thrive using the pre-recorded content model. Sling TV might be the original skinny bundle supplier. But there is lots of new competition coming in that segment from Hulu, DirecTV Now, YouTube TV and others.

source: Business Insider

Sling TV Could Succeed Even if it Fails with Target Milliennials

Dish Network's new Sling TV streaming service has been designed to appeal to Millennials who do not find subcription TV appealing. 

Whether the service works, and for whom it works, remain to be tested. In fact, it is possible the service might appeal to consumers other than Millennials.

Ask Auto manufacturers how difficult it is to forecast demand for automobiles produced to appeal to a Millennial audience. 

The Chevy Sonic is aimed squarely at 18-to-30-year-olds. 

But the largest segment of customers for vehicles such as the Sonic--about 42 percent of buyers in 2013--are Baby Boomers, according to Edmunds.com. 

Five years ago, the proportion of older customers buying cars in this category was 29 percent.

Conversely, the percentage of buyers 18 to 34 buying new subcompact cars fell to 12 percent in 2013, down from 17 percent in 2008. 

In other words, even the best marketers cannot predict how vehicles designed for younger customers will appeal to that demographic, compared to others.

So Sling TV might succeed even if it does not appeal to Millennials, if the ulimate base of customers actually is people who want to watch linear TV, but don't want to spend very much. 

Video Entertainment "Market" Now Smashes Separate Regulatory Walls between "Content and Apps" and "Delivery"

The new move by T-Mobile US video streaming business is portrayed by the company itself, and news reports, as representing competition with cable TV.

“The Un-carrier will build TV for people who love TV but are tired of the multi-year service contracts, confusing sky-high bills, exploding bundles, clunky technologies, outdated UIs, closed systems and lousy customer service of today’s traditional TV providers,” said John Legere, T-Mobile US CEO.

A few reports correctly described the service as a streaming offer more akin to over-the-top services offered by AT&T, Dish Network, YouTube and Netflix.

But that might be quite the point. T-Mobile US itself describes its move as representing a move into the $100 billion revenues subscription TV market dominated by cable and telco suppliers.

““We’re in the midst of the Golden Age of TV, and yet people have never been more frustrated by the status quo created by Big Cable and Satellite TV,” said Mike Sievert, Chief Operating Officer of T-Mobile.

The over the top service represents the “successor” service to linear TV, virtually all observers agree. That is why Disney is launching its own retail streaming services, for example.

And that is perhaps among the most-important ramifications of the move. In the application business--including the application businesses traditionally operated by telcos and cable TV--app delivery has been decoupled from the use of access networks.

Relevant competition for cable TV includes satellite and telco services, but also DirecTV Now, Netflix, Amazon Prime, Hulu, Sling TV and other services, with additional competition coming from Facebook, YouTube and many social networking apps.

In other words, the traditional regulatory distinction between unregulated “content or data services” and regulated access service providers is evaporating. Netflix and others create their  own content, bundle and license content and deliver that content.

That makes Netflix (if not a “perfect” substitute) a rival for linear TV subscriptions. The move by T-Mobile US into the OTT video subscription business represents that evolution.

Streaming services might be owned by app providers (social media, YouTube), commerce providers (Amazon), content studios (Sony, Hulu), or distributors (AT&T, Dish Network, Verizon, Comcast).

Whomever the owner of the assets, the new reality is that content creation, packaging and delivery now is becoming independent of the access mechanism. That will--or should--eventually have regulatory implications of major scope.

Defining the scope of a “market” now is more complicated--and much broader--than it once was.

So Far, the HBO Model Leads OTT Subscription Video

It might be less than fully accurate to characterize over the top streaming services as being “like HBO” in emphasizing pre-recorded content or “like Sling or DirecTV Now” in focusing on live network streaming. Still, there are differences. Netflix long has been viewed by many as a functional substitute for HBO, while Sling has been viewed as a way of streaming TV networks.

In that regard, Netflix users average 28 hours of monthly viewing time, while Sling TV customers watch 47 viewing hours per month. To be sure, the lines are not impermeable, as Netflix and Amazon Prime, for example, create a growing amount of original series content.

Still, as Sling customers are seen as substituting OTT for linear TV subscriptions, you see the pattern. There is a difference between live streaming of networks and access to archival or other pre-recorded content.

The analogy is to sports or news content, which provide the highest value as “live” formats (even if the news category is lightly viewed in many age segments). That behavior suggests there are at least two big segments of the OTT business: the HBO style service and a replacement for “live” TV.

YouTube represents the third major segment: user-generated video, with a distinct revenue model mostly based on advertising, not a combination of advertising and user fees (subscriptions), at least for the most part, as YouTube also has moved closer to supplying a subscription TV service.

source: ComScore

Video Business Change: Watch for Qualitative Changes

The U.S. linear subscription video business lost more than one million video customers

in 2015, about four times the level of 2014 losses, and the third year in a row that linear subscription TV losses have occurred, according to SNL Kagan.

The fourth quarter improved, with losses no worse than the fourth quarter of 2014. The industry dipped by 15,000 total customers in the fourth quarter.

Mostly, that is noise.

Some observers will suggest that performance reflects a high level of promotional activity on the part of suppliers. Others will conclude that the cord cutting trend has abated.

Not so. The big changes now are going to be qualitative, not quantitative, in the sense of subscriber counts. In other words, OTT suppliers will begin a long march to replicating most of the content richness linear services provide.

So the key changes will not so much be about subscriber gains or losses, but the change in the nature of the relative products. OTT will gain richness, while linear services will offer more-affordable packages with less content diversity.

Cable TV operators lost 599,000 net accounts in 2015, the first time in seven years that the cable TV industry lost fewer than one million accounts. Some will point to telco account losses as a large part of the reason for the limited cable TV losses.

The satellite providers lost 478,000 subscribers during the year, compared to a loss of 39,000 in 2014.

The telco segment ended 2015 essentially flat.

According to Leichtman Research, the big net change in 2015 was that cable TV providers did much better, telcos did much worse.

The top nine cable companies lost about 345,000 video subscribers in 2015, compared to a loss of about 1,215,000 subscribers in 2014.

Satellite TV providers added 86,000 subscribers in 2015 (including Dish Network OTT subscriptions). In 2014 the satellite providers gained 20,000 subscribers.

Excluding the Sling TV gains, DBS providers lost about 450,000 linear subscribers in 2015.

The top telephone providers lost 125,000 video subscribers in 2015, compared to a gain of about 1,050,000 net additions in 2014.

In the fourth quarter of  2015, the top linear TV providers added about 110,000 subscribers, more than the 90,000 added in the in fourth quarter of 2014.

The largest cable companies added about 125,000 subscribers in the quarter, the first quarter for net additions since the first quarter of 2008.

DirecTV net adds of 214,000 subscribers in the quarter were higher than in any quarter since the fourth quarter of 2010.

AT&T U-verse lost 240,000 subscribers in the quarter, compared to a gain of 73,000 subscribers in the same quarter of 2014.

It likely is unwise to assume that the shift to OTT entertainment video has slowed, even if Netflix and others have begun to reach saturation levels. But the bigger changes might come in the form of packaging and pricing, not subscription levels as such.

Look for OTT offers to proliferate, and gradually start to replicate more of the program diversity linear services represent. That is the growth pattern we have seen recently for any number of competitive services.

They start out on the low end of the value continuum, but are available at vastly-lower cost. Over time, value increases. That is going to be the pattern for OTT video as well.

What HDTV Could Teach Us About Mobile, OTT Video

“People prefer HDTV even when the TV is off,” one executive quipped, in the days before high-definition TV was launched in the U.S. market. What he meant was that the different aspect ratio of the screen (16:9 compared to 4:3) was preferred over the analog TV screen. It is easy to say that people wanted the higher-definition picture, but there were other elements of the experience that also changed at the same time.

The higher resolution is part of the long trend towards more realism in video, to be sure. But higher resolution also meant that pictures looked better on larger screens. So part of the attraction of HDTV was larger screens.

At the same time, the shift to flat screens also had begun, adding a further stylistic change of form factor, and something consumers clearly preferred.

The point is that sometimes consumers desire a product for all kinds of reasons beyond the stated purpose of an innovation.

That is probably good advice when considering more-recent changes, such as the shift to on-demand, non-linear viewing and streaming delivery. People might choose to behave in ways that ultimately may surprise, and not as expected.

For example, most likely believe the story that streaming has value because it provides sufficient choice at lower prices than linear TV. But a new Harris Poll suggests most consumers will eventually spend as much on their streaming subscriptions as they do on linear TV.

source: Harris Poll

Regardless of whether it is linear subscription TV  or OTT, consumers are consistent in how much they are willing to pay and the amount of content they view. Consumers want about 15 cable channels or OTT services, and are willing to spend $100 per month total, the survey suggests.

The typical U.S. home spent $107 a month on linear subscription TV service in 2018, according to Leichtman Research. And prices for streaming services also are growing. The linear TV replacement services, for example, cost between $40 and $70 a month, with Sling at the low end and DirecTV Now at the high end.

A couple of observations therefore are apt. The AT&T move into linear TV has been criticized as a failure. And some also did not favor its later move into content ownership, either. Some supporters of both moves might say the Harris Poll results tend to confirm that linear video is a springboard to OTT video, and will ultimately be of similar revenue magnitude, even if less of the total revenue might flow to any single former linear video provider.

But the poll results also suggest the shift to skinny linear bundles makes sense, since that approach is best suited to a new market in which overall non-streaming demand falls. But linear streaming formats and on-demand formats will coexist.

Mobile TV is viewed as a coming evolution of the business as well. Consumers who use at least one OTT service are heavy mobile users, with many saying they are on their smartphone for more than six hours every single day.

Streamers also consume more than 2.5 hours of video content every day on their smartphones, according to the Harris Poll commissioned by OpenX.

source: Harris Poll

What is less clear is how the video subscription business could change as mobile delivery becomes easier, or more popular. Screen size does not seem to be the limitation it once was, as mobility now seems to be valued at least as much as screen size. Unclear are the potential changes in features.

Some might argue that the big change coming with mobile streaming is simply the screen the video is consumed on, namely, the mobile phone instead of the television. So video consumption becomes less place-based (not a fixed TV location).

At least in principle, that creates new opportunities for temporary venue-based video, in some instances. But all that is yet to be developed. Still, it is possible that mobile TV might eventually result in new features for video consumption, as HDTV actually represented several concurrent changes beyond image quality.

Verizon Probably Looked North to Create Custom TV

The new Verizon Custom TV bundle, allowing FiOS customers to buy a simple, affordable 35-channel service, with the option to add on theme packs of channels for about $10 each, is a clear reaction to market demand for less-costly, more customized ways to buy entertainment video.

But the new Custom TV, similar in many ways to Sling TV and other over the top packages yet to come, most resembles a “pick and pay” model instituted in Canada.

Cable TV channel unbundling--though not complete unbundling--is coming to the Canadian market. By the end of 2016, subscription TV customers in Canada will be able to buy many channels they want, one by one or in small packages, the Canadian Radio-Television and Communications Commission has ruled.

By the end of 2016, TV subscribers will have the option to add those networks to a “skinny” basic cable package that will cost no more than $25 a month. But consumers can buy a traditional bundle of channels if they choose.

Distributors must have the “skinny” basic service announced Thursday in place by March, 2016.

That tier must include all local and regional stations, public interest channels such as the Aboriginal Peoples Television Network (APTN), education and community channels, plus provincial legislature networks.

If distributors wish, they can add national over-the-air stations such as CTV, City and Global, or U.S. networks ABC, CBS, NBC, FOX and PBS. But they cannot raise the price beyond $25 a month.

By December of 2016, other channels must be available a la carte. But those channels also can be sold in a small bundle of perhaps five or 10 channels, which might be built by the viewer or the distributor.

"Binge On:" 24 Streaming Services Available on T-Mobile US Plans With No Hit to Usage Buckets

“Binge On” is the new mobile video streaming plan from T-Mobile US that allows customers to stream Netflix, HBO and other services without deducting usage from their data plans.

Beginning Nov. 15, 2015, video streams free at T-Mobile US subscribers of HBO, Hulu, Netflix, SHOWTIME, Sling TV, STARZ, WatchESPN; 24 streaming services in total.

The feature is available to all current and new Simple Choice customers on qualifying plans at no extra cost.

Binge On works, in part, by coding and delivering video at “DVD quality.” Crackle, Encore, ESPN, Fox Sports, Fox Sports Go, HBO Now, HBO Go, Hulu, MLB, Movieplex, NBC Sports, Netflix, Sling TV, Sling Box, SHOWTIME, STARZ, T-Mobile TV, Univision Deportes, Ustream, Vessel, Vevo, VUDU presently are part of the service.

T-Mobile is also including Verizon’s Go90 and AT&T’s DirecTV streaming services in Binge On.

Perhaps it is worth noting that the plan does not "treat all bits equally." Content providers have to meet T-Mobile US technical rules. But as often is the case, unequal treatment has a clear consumer benefit.