Monday, January 5, 2015, 4:24 PM ET|Posted by Will Richmond
Dish Network has finally announced its OTT virtual pay-TV operator ("vPop") service, dubbed "Sling TV," priced at $20/month and available in Q1 '15 on multiple connected and mobile devices.
Sling TV includes 12 linear cable TV networks from Disney (ESPN, ESPN2, Disney Channel and ABC Family, plus a feed of Maker Studios' videos), Turner (Cartoon Network, CNN, TBS, TNT and Adult Swim) and Scripps (Food Network, HGTV and Travel Channel). Beyond the obvious missing cable TV networks, none of the big 4 broadcast TV networks are included.
In addition to the $20/month tier, Sling TV is also offering two $5/month packages - one for kids (with Disney Junior, Disney XD, Boomerang, Baby TV and Duck TV) and one with news and information (with HLN, Cooking Channel, DIY and Bloomberg TV).
Sling TV is aimed at urban millennials who don't currently subscribe to pay-TV. On the one hand, Dish deserves credit for trying to innovate beyond the traditional - and expensive - pay-TV bundle, addressing a segment of the population that is more prone to be a cord-never than ever before. Millennials have become big consumers of online video, with Netflix and YouTube particular favorites, therefore diminishing their willingness to shell out $80/month or more for pay-TV.
However, there are at least 5 key reasons why Sling TV will be a tough sell with limited adoption.
1. ESPN is necessary, but not sufficient, for committed sports fans
Without a doubt, ESPN and ESPN2 are the most compelling reasons why anyone will subscribe to Sling TV. The problem is that for any committed sports fan, these networks (plus TNT, which is also in Sling TV) are not sufficient - both broadcast TV and regional sports networks (RSNs) are also essential, if not MORE important. Broadcast is still the home of Sunday and Thursday night NFL football, and RSNs are where lots of baseball, hockey and basketball are found. So Sling TV has a value proposition to a segment of casual sports fans, but a far thinner one to committed fans who need a full pay-TV service.
2. Narrow value to entertainment viewers
As big a draw as ESPN is, if Sling TV wants to appeal to non-sports fans it needs to have strong entertainment-oriented TV as well. But Sling TV is missing some of the networks, like AMC, Comedy Central and FX which have programming that appeals to millennials. Despite the recent double-digit percentage decline in linear viewing by 18-34 year-olds, in reality, this segment still watches approximately 20 hours per week of linear TV, the majority of which is entertainment. And with entertainment on OTT alternatives like Netflix, Amazon and Hulu getting better all the time, it will be harder for Sling TV to entice entertainment-oriented viewers.
3. Single stream model is restrictive
The days of everyone huddling around the TV to watch the same program at the same time are gone forever (except for sports). Yet Sling TV's model allows only one stream to be watched at a time, which would require mutual agreement among household members. That's a non-starter for households with young kids, or even shared apartments among singles when everyone has multiple devices. Sling TV's rigid model is all the more unappealing given rampant password sharing for OTT and TV Everywhere services, not to mention freely available online video options.
4. No DVR and limited VOD
Exacerbating the single stream issue are Sling TV's missing DVR and limited VOD, which underscore its "Best of Live TV" market positioning. But millennials are the most likely to watch DVR and on-demand, so once again, their absence will be very noticeable. Aereo, which also targeted a millennial audience, recognized this and included a robust DVR feature. Remember, no DVR not only means no time-shifting, but also no ad-skipping and no binge-viewing. How many Netflix-crazy millennials will be ready to accept that type of experience? Also, pay-TV operators have put a huge emphasis on DVR and VOD, increasing viewers' expectations and in turn further driving time-shifting and binge-viewing behaviors.
5. Real cost-savings is minimal and complexity is high
At first blush, Sling TV's $20/month fee seems like a bargain vs. pay-TV. But then there are the add-on tiers to fill out the lineup. And for the above reasons, sports and entertainment fans will likely need to augment, in the former case with sports services like MLB.tv and in the latter case, with Netflix, HBO OTT and/or others (which they may ALREADY subscribe to). Inevitably, all of these standalone subscriptions lead to higher costs, complexity and fatigue. In this context, the value of a full pay-TV subscription's simplicity actually increases, as I recently wrote. All of this creates both a subscriber acquisition and retention challenge.
Sling TV is wisely trying to keep its monthly cost as low as possible, as pay-TV's high cost is the number one objection cord-nevers have. But as a result, Sling TV's value proposition is quite thin. Add it all up - missing sports networks, missing entertainment networks, a restrictive single stream model, lack of DVR/VOD and minimal cost/increased complexity and it's awfully hard to see how Sling TV is going to appeal to a very wide swath of the millennial market it's targeting.
It's tantalizing to envision a pay-TV service that finally cracks the code with a low-cost, high-value offering, but I suspect Sling TV will find it as elusive as have others before it.