Sling TV highlights Dish’s challenge

LAS VEGAS– At their press conference here during CES, Dish executives made sure everyone got the message about their low, low prices for the new Sling Television linear OTT service.

sling TV logo“The price will be substantially — and I mean substantially — below” traditional pay-TV offerings, Dish president Joe Clayton trumpeted. For just $20 a month — that’s right, just $20 a month~ — you can get a package of a dozen linear channels, including ESPN, CNN, Cartoon Network and the Disney Channel, streamed to your smartphone, tablet, connected TV or tablet without a pay-TV subscription, with a promise of “more [channels] to come.”

Add-on packages feature, kids, sports and news & information content will go for $5 a month, each.

And those prices will never increase! Or at least not very much. “That’s not an introductory price,”  declared Sling TV CEO Roger Lynch “That’s a price that starts low and stays low.”

But wait, there’s more! There’s no special equipment to buy — you can get the service on devices you already own — and there’s no long-term commit. You can cancel at any time!

Why wouldn’t you sign up?

Well, because Sling TV does not include any of the major broadcast channels, for one thing. The broadcast networks, led by CBS, are by and large doing their own over-the-top thing, direct to consumers, as are HBO and Showtime — all sold separately from Sling TV. The Sling TV version of ESPN also will not include NFL games, so no Monday Night Football.

To watch NFL games on mobile devices you’ll need to pay either Verizon, for in-market games, or DirecTV, for out-of-market games.

“We are not yet convinced that the new initiatives from HBO, CBS and others will ultimately deliver the best consumer experience,” Clayton offered. “We’re also not convinced they will benefit the overall TV ecosystem.”

Perhaps not, but that doesn’t necessarily mean Sling TV has the right package of programs at the right price, either. For a service purportedly aimed at millennials, Sling has a big hole in its lineup without Viacom’s Comedy Central and MTV, meaning no Jon Stewart, South Park or Punk’d. And even at just $20 a month, Sling TV requires a broadband connection that alone can run $40-$60 a month, raising the effective price of Sling TV to something more like cable TV.

“I think that’s false math,” Lynch told Business Insider in an interview at CES. “People buy broadband already. They buy Netflix already. These are things they buy already. The question is, what else do they buy? Right?…

“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.”

Perhaps so, but the question highlights the real challenge confronting Dish as it launches Sling TV: What role will channel bundlers play — if any — in a linear OTT world?

In the facilities-based pay-TV world, the role of bundler is dictated by the need to build and maintain a dedicated network for delivering video, be it coaxial cable, fiber optics or direct-broadcast satellite. Since not every channel can build its own delivery network, bundling them together into a single pipe is a necessity.

In the non-facilities based OTT world, bundling is not a necessary predicate to delivering the content. It can still provide value to the consumer, as Dish maintains, if packaged and priced correctly. But Dish is likely to have less flexibility to get those parameters right than its potential linear OTT competitors.

Cable operators and telcos, for instance, are also primary broadband providers, and therefore are in a position to monetize over-the-top usage by their subscribers whether, or not, they are directly involved in providing the content. Mobile broadband providers are similarly well positioned. Whatever OTT content bundling they ultimately may do can be priced, packaged and, most important P&L’d, in conjunction with the provision of broadband service.

Dish, however, is not currently a major fixed broadband provider. And, while it has accumulated a fair amount of wireless spectrum, it has yet to build a wireless network to utilize that spectrum (paging T-Mobile). It’s role in the linear OTT space, therefore, is limited at least for to being a pure-play channel bundler, which means getting bundle and the price — to say nothing of its own costs — exactly right.

It has to start somewhere, of course. And Sling TV is a start. But we won’t know how good a start until the competition weighs in.