Sling TV will Cannibalize Dish Network Linear Video, says CEO Charlie Ergen

A recurring phrase used by Dish Network CEO Charlie Ergen, when asked about his plans for monetizing Dish Network’s spectrum holdings, is that “we are not suicidal.” In other words, Dish Network does not intend to deploy or monetize those assets in ways that destroy shareholder value.

“Wireless is an oligopoly,” he noted recently. So that means “we see working with others, not AT&T or Verizon.” In other words, should Dish Network decide to create a retail or wholesale network, it is not likely to build its own facilities, but lease them.

“Optionality” is a concept Ergen has relied on it the past, as well. In other words, get spectrum and then see what can be done to monetize it. “Short term, we had to get the licenses,” Ergen said. “Then we need to get handset compatibility.”

“We will see where it goes from there,” he said. But Ergen also said he will wait to see what happens “with the two big mergers,” referring to Comcast’s bid to acquire Time Warner Cable, and AT&T’s effort to buy DirecTV.

When Ergen says “we don’t know for sure what we’re going to do,” that likely is quite accurate. “Our dream is to compete with AT&T and Verizon, but we’re not suicidal,” Ergen said. “Whatever we do, it is long term value enhancement.”

Ergen also was honest about another thing: “without our spectrum, we would have had to sell.” In other words, like DirecTV, Dish Network would have been in an untenable situation as a stand-alone satellite TV company.

But Ergen has been more willing to cannibalize his legacy revenue streams to remain a leader in the new business he sees emerging, much as Disney has been in the forefront of streaming, when other peers are more hesitant.

That’s a somewhat unusual strategy for any firm that is a leader in its space. And Ergen does believe even Sling TV will cannibalize Dish Network’s linear subscription business. But it is the future. In the past, Ergen has said that if he were starting in the video entertainment business today, he might not use satellite delivery.

Big 2015 Change in U.S. Linear Video Market: Cable Gains, Telcos Lose

The 13 largest linear video providers, representing about 95 percent of the market lost a net 385,000 accounts in 2015, marginally worse than the net loss of about 150,000 subscribers in 2014 and a net loss of about 100,000 subscribers in 2013, Leichtman Research says.

Keep in mind that those 13 suppliers have a collective 94.2 million subscribers, so even a loss of 385,000 net accounts represents just four-tenths of one percent of the base of customers.   

The big net change: 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.

Providers	Subscribers at End of 2015	Net Adds in 2015
Cable Companies
Comcast	22,347,000	(36,000)
Time Warner Cable	11,035,000	43,000
Charter*	4,430,000	11,000
Cablevision	2,594,000	(87,000)
Mediacom	855,000	(35,000)
Cable ONE	364,150	(87,067)
Other major private companies**	7,435,000	(153,400)
Total Top Cable	49,060,150	(344,467)
Satellite TV Companies (DBS)
DirecTV	19,784,000	167,000
DISH^	13,897,000	(81,000)
Total DBS	33,681,000	86,000
Telephone Companies
AT&T U-verse	5,640,000	(303,000)
Verizon FiOS	5,827,000	178,000
Total Top Phone	11,467,000	(125,000)
Total Top Pay-TV Providers	94,208,150	(383,467)

source: Leichtman Research

Is Distribution or Content Still King? It's Changing, Again

There is a very old debate in the video entertainment industry about whether ecosystem power is held by distributors or owners of content.

A perhaps interesting illustration of how the power could shift is illustrated by current negotiations between Apple and Disney about content rights. Disney owns ESPN, for example, considered an anchor for a streaming video service.

Disney’s negotiating is familiar. Disney wants Apple to carry more Disney channels in exchange for a carriage agreement. That is what typically happens in any negotiating session between major networks and distributors.

In this case, it remains unclear whether Apple, as a distributor, or Disney, as a content supplier, has the stronger hand. Both are powers in their own right, within the broader Internet ecosystem.

Perhaps the situation of the channels that will not be asked to be part of a new streaming service (featuring perhaps 25 channels is instructive) illustrates the changing nature of the equation.

Though I generally argue that “content is king,” at least in recent years, in past times I have argued that “distribution was king.” But that was a time when cable TV operators--only one in each market--were the sole distribution agents.

As satellite TV came on the scene, preceded by smaller hotel and satellite master antenna TV operators, as well as mostly unsuccessful MMDS operators, the number of important distributors grew. Most recently, cable TV operators, Google Fiber and now the streaming services have added to the number of distributors.

That arguably has titled power back to the content owners.

But the Disney-Apple and Sling TV services offer a way of revising  the nature of the argument. Perhaps the generally-unused adjective “important,” used to modify “channel” or “network,” is the new key.

In a world where either a la carte or skinny bundles gain share and importance, it is the small, niche channels that lose power. They won’t be included in the 20-channel or 30-channel bundles. So they lose bargaining power because the distributors do not want to carry them.

The anchor services such as ESPN will continue to hold considerable power, as they are the “must have” channels. All the smaller channels will lose value.

So “important content” is king. Not all content will continue to have the same status as in the past. And, for some time, the power of distributors is going to grow, as new streaming sevices struggle to break free and assume dominance of the distribution business.

So it isn’t going to be easy to say that “content” or “distribution” clearly is king.

Only AT&T U-verse Loses No Net Video Subscribers in First Quarter 2020

It will not surprise you that leading cable and telco subscription video providers lost customers in the first quarter of 2020. What might surprise you is that AT&T’s U-verse service lost zero customers in the quarter. That was the exception to the rule, which was that service providers lost customers in the quarter. 

Pay-TV Providers

Subscribers at end of 1Q 2020

Net Adds in 1Q 2020

Cable Companies
Comcast	20,845,000	(409,000)
Charter	16,074,000	(70,000)
Cox	3,820,000	(45,000)
Altice	3,137,500	(41,700)
Mediacom	693,000	(17,000)
Atlantic Broadband	306,252	(2,386)
Cable One	303,000	(11,000)

Total Top Cable

45,178,752

(596,086)

Satellite Services
DIRECTV	15,136,000	(897,000)
DISH TV	9,012,000	(132,000)

Total DBS

24,148,000

(1,029,000)

Phone Companies
Verizon FiOS	4,145,000	(84,000)
AT&T U-verse	3,440,000	0
Frontier	621,000	(39,000)

Total Top Phone

8,206,000

(123,000)

Streaming Service
Hulu + Live TV	3,300,000	100,000
Sling TV	2,311,000	(281,000)
AT&T TV NOW	788,000	(138,000)

Total Streaming

6,399,000

(319,000)

Total Top Providers

83,931,752

(2,067,086)

source: Leichtman Research

Why Content Will Drive Mobile-App Provider Partnerships

Even if they operate in different parts of the value chain, mobile service providers and app providers increasingly will partner, many now argue.

Beyond 2020 to 2025, the degree of collaboration might hinge on content services, SCF Associates has argued. “That may involve MNOs becoming much closer to the major web services players,” argued Simon Forge, SCF Associates analyst.

To be sure, the partnering recommendation is not new, nor a strategy mobile and fixed network service providers have failed to envision. Thinking--and some action--around OTT voice and messaging has been extensive.

Still, it has generally been hard for over-the-top challengers and service providers to make robust revenues or profits on OTT voice and messaging.

One analysis conducted for the International Telecommunications suggested that no OTT strategy would be able to arrest a major decline of voice roaming prices, and therefore revenue.

In that analysis, resistance to OTT voice (scenario one)r collaboration (scenarios two, three and four) all lead to vastly-lower voice roaming prices.  

Some might note that past successes or failures in the over-the-top messaging or voice areas is not a predictor of future developments, in large part because of the role content apps and services now are assuming in the “telecom” space.

For starters, content is “sticky” and “unique” in a way that voice, messaging or Internet access is not. That is why prices, profit margins and revenue for content services have not followed the almost-linear downward path seen for voice and messaging.

Uniqueness is why streaming and linear channels and services create their own unique content, and seek exclusive licensing deals. That offers lots of room for partnering between content apps, services, networks, studios and copyright owners and access providers (both mobile and fixed, but especially in the mobile realm).

source: ITU

Think of services such as Verizon’s Go90, Comcast Watchable and T Mobile's BingeOn. All provide examples of the role content services are expected to play in core mobile and fixed network revenue plans.

That also is true of Dish’s Sling TV, Sony PlayStation Vue, Alibaba TBO and Youku, Showtime’s carriage on Hulu, YouTube’s Red subscription service, and now the ability to buy OTT subscriptions from HBO, Showtime and others on Amazon’s Prime service.

Smaller networks, in particular, may ultimately need OTT carriage to survive, and therefore have incentive to eventually partner with mobile firms.

Recent research indicates that 15 to 20 prominent niche services will rise by 2018 to eat into share now held by Netflix, and the premium OTT market as a whole will total $8-10 billion by that time, notes Forge.

In the same vein, networks, pay TV providers, and mobile carriers are all looking at strategic ways they can make the most of their content and infrastructure to create compelling consumer service offerings, particularly for Millennials, Ooyala argues.

AT&T partnered with Hulu for mobile and Internet customers, and Time Warner has a new Internet TV service.

Cablevision has a cord-cutter package linking broadband, over-the-air digital antenna and in some areas, Wi-Fi-based phone service.

The Verizon Fios Custom TV bundle omits some high-cost networks, while Comcast also sells a  “mobile-first IPTV service,” Stream TV.

source: ITU