Recently, DISH Network Corp. (DISH) has unveiled its Internet TV service called “Sling TV” at the International Consumer Electronics Show. Availability of Internet TV at an exceptionally low price along with the accessibility to some top-rated TV channels such as ESPN of The Walt Disney Co. (DIS) may become a game-changer for the pay-TV industry while posing a significant threat to cable MSOs (multi-service operators).
The Sling TV launch is not entirely new to the industry as Sony Corp. (SNE) has already launched the beta version of its Internet TV called “Playstation Vue.” Moreover, Verizon Communications Inc. (VZ) has been focusing on strengthening its Internet TV and online content delivery business while AT&T Inc. (T) has entered into a partnership with Chernin Group to offer such services.
Most importantly, the Sling TV service will be available for as low as $20 a month to view 12 Nielsen-rated sports, lifestyle, family and news networks. Notable among these channels are ESPN and Disney Channels along with HGTV, Food Network and Travel Channel of Scripps Networks Interactive Inc. (SNI). Customers will also be able to access add-on packages for an additional $5 per month.
This is in sharp contrast to an average cable TV connection, which costs almost 3-4 times more. Although cable packages offer a wider range of TV channels, customers are not always interested to all those TV shows. Instead, availability of a few top-rated TV channels for a low fee may become highly attractive for a larger section of the population.
Technically, Internet TV is similar to cable TV offerings. Internet TV shows can be viewed using a broadband connection and mobile gadgets like tablets, smartphones, Roku box, smart TV to name a few. To sum up, Internet TV offers a TV Everywhere experience to subscribers. We believe that the growing deployment of super-fast 4G LTE wireless technology and significant adoption of portable mobile devices are the primary reasons behind the popularity of Internet TV.
Over the last couple of years, the internal dynamics of the U.S. pay-TV industry have been gradually shifting from cable and satellite TV operators to low-cost over-the-top service providers. The strong presence of online video streaming providers like Netflix Inc. (NFLX) and Hulu are posing significant threat to the existing pay-TV business model. Meanwhile, cord-cutting has become a serious concern for major pay-TV operators.
DISH intends to check customer churn with its latest Sling TV offering. However, the risk is that a large part of its existing subscribers may opt for this low-priced service instead of paying for much broader but pricy satellite TV services. All leading cable MSOs, such as Comcast Corp. (CMCSA), Time Warner Cable Inc. (TWC), Charter Communications Inc. (CHTR) and Cablevision Systems Corp. (CVC) are likely to face similar issues.
This is a matter of serious concern for all legacy pay-TV service provides (cable TV and satellite TV). Video offering, the core business area of the cable TV operators, seems to be slipping out of their hands. In the meantime, the multi-channel video market in the U.S. is almost saturated. Roughly 87% of the total U.S. households view multi-channel TV. At this juncture, availability of a cheaper source of TV viewing may jeopardize cable and satellite TV industry’s largest source of revenue.
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