The traditional pay-TV model as we've known it for years finally looks like it's going to change.
Satellite TV company Dish is releasing "Sling TV" a new $20-per month internet-based subscription service that gives users the following 10 channels: TNT, TBS, CNN, Food Network, HGTV, Cartoon Network, Adult Swim, the Disney Channel, ESPN, and ESPN2.
On the floor of the CES trade show in Las Vegas, we interviewed Sling TV CEO Roger Lynch about his new service.
Sling TV is simultaneously exciting and underwhelming. It's the first time live, traditional TV channels are being offered through the web to users. But, it's a small package of channels, and it doesn't seem like it's a radical departure from what we currently have.
Below, we have an edited transcript of a conversation we had with Lynch. Here are the highlights:
- Anybody that says this isn't a good deal is using "false math," says Lynch. Some people (like ourselves) note that Comcast and others offer more channels for a similar price. Lynch says if you actually do the math, that's an imperfect comparison. He says once you add up the installation fee, equipment, and other hidden charges, it comes out to 3X the price Sling is offering.
- Sling is targeting millennials who are used to services like this. Lynch cited Spotify, which charges ~$10 per month, and Netflix, which also charges ~$10 per month. Younger people like having their content with them where ever they go. They like signing up online with no commitment, and Lynch thinks Sling fits that model.
- He says Sling isn't on Apple TV because Apple has rigid user interface (UI) rules that prevent Sling from doing much of what it wants to do.
- He thinks regulators should "take a long look" at Comcast merging with Time Warner Cable.
Here is the interview in full:
BI: What's the reaction been so far? What are people missing?
Roger Lynch: 95-97% of it is getting what we're trying to do and a little bit of it is looking at it through the traditional pay TV lens.
Our objective is not to replicate pay TV. We're not trying to say this competes with Dish's big package. That's not we're trying to do. We're trying to go after the market that didn't choose Dish's big package, or Comcast, or DirecTV. And the way to do that is the skinnier package, fewer channels, and a much lower price. And change the model so it's on devices people already own so you don't have to subsidize huge subscriber acquisition costs because that's one of the ways we keep the prices low.
Is this really a good deal? Look at Comcast's website, and there is a $60 package for internet plus 140 channels. Just internet is $40-$50. Add this service, plus Netflix, and suddenly it's a lot more.
I think that's false math. People buy broadband already. They buy Netflix already. These are things they buy already. The question is, what else do they buy? Right? And sure, a lot of people take that bundle.
Our objective is not to take away all the customers that are buying the traditional big bundle. What this is an alternative that will resonate with people who think "that big bundle's not for me" for whatever reason.
Remember, whatever math you do, the average customer is paying over $90 per month for pay TV.
Look at the promotional price DirecTV does, $19.99. If you go through and sign up — and it's true of any pay TV service — and get to the end and realize how much you're going to pay, it's going to be close to $60 because you've got equipment fees, franchise fees, and all these other fees loaded on into it. You can't just look at programming package price and compare it to what we're doing. Because the programming package is only that. Then you have to pay all the other stuff too.
Why no support for Apple TV?
Apple TV has a templated structure. Our app looks the same on all devices. They have a more rigid templated structure. I wouldn't say there's any reason we can't be on it. We just — we have a lot of devices we're launching on, and we have to prioritize.
So, why not prioritize the Apple TV?
It's a great device, but because of the templated approach, we have to do a lot more work to figure out how do we show live TV with look-back, and on-demand, in a UI that may not have been designed for that because you don't control the UI on Apple TV.
Do you think you'll do that eventually?
We'll see.
There are reports that ESPN can leave if you get too successful, and have too many subscribers. Is that true?
I don't comment on our programming deals. They are confidential.
Is this the right approach? Isn't this essentially the same model? A user pays for a bundle of channels. It just happens to be over the internet instead of through a cable or fiber.
I think this is exactly the right model. This is not the traditional pay TV model. We could have done the traditional Pay TV model and had 120 channels. Those would have been the easy deals to do, but they would have missed our target market because we would have ended up with a $60 or $70 bundle.
Our strategy is to have a low price basic package and then you can take these genre packs. If you have kids, buy a "kids pack" and get 6 or 7 other kids channels. If you want more sports, ESPN, ESPN2 is in the basic package, you can get more sports.
Doesn't this just end up being what we have now? You start basic, start adding channels, and the costs keep going up.
This is nothing like what we have right now. What we have right now with pay TV is, big, bigger, biggest. Let's say there's a channel you want. You go to your pay TV operator. Is it in the big pack? No. Is it in the bigger pack? No. Oh, it's in the biggest pack, so I have to buy 240 other channels to get the one channel that's in the biggest pack. That is very different from, I have my base pack and my interest is sports, so all I am going to buy is sports channels. Very, very different.
Why isn't this a true a la carte model where I choose my channels?
Dish is the only major pay TV provider that I'm aware of that's been supporting of a la carte. We would do a la carte if it worked for programmers. The fact of the matter is it doesn't work for programmers. This is not truly a la carte, but it is closer.
Why do you think millennials aren't paying for TV? Do they not have money? Or do they prefer on-demand services? Something else?
I think the reason millennials aren't buying it, price is certainly one of the reasons. But, if you think about the other services that millennials buy — Spotify, that's pretty popular. Millennials watch Netflix. Services like that, that model is, my content's with me. Or iTunes. My content's with me. It's on my phone, it's on my tablet. I can subscribe on an impulse, I can cancel any time I want, no contracts, no commitments. It's not tied to my physical address that I don't know if I am going to live there for 2 years, or six months.
So, compare that to traditional pay TV. I think the business model of traditional pay TV is so different from the other services millennials subscribe to that it just doesn't fit how they think about buying media. This is intended to fit more like that.
Do you have exclusive deals? Can Amazon come in, can Google come in and do this?
You'd have to ask programmers. The fact is that programmers haven't licensed to companies like that. It helps to have a 14 million subscriber base for Dish to negotiate.
Why does that help?
Because when you negotiate your new deal with a programmer you pay $1 billion a year to, you have a little bit of leverage in that negotiation. If you have 0 subscribers and you pay $0 today you have no leverage in that negotiation.
Another criticism of this sort of model is that the people that provide internet connections, also provide pay TV, so they can just raise the price of an internet connection if this becomes popular.
I think you're making a strong argument for regulation on Comcast and for the FCC and the DOJ to take a long look at that merger between Comcast and Time Warner Cable. In any given market, you really only have one truly high speed broadband provider and that is a risk.
