A change of paradigm in TV : Internet TV is on (BusinessWeek)

Dish’s New Sling TV Service Could Free You From Cable

Joseph Clayton, Dish Network's CEO, speaks during the 2015 Consumer Electronics Show in Las Vegas
on Jan. 5. 

Dish Network is making the first big news in what’s likely to be a busy year for the future of television. At the International Consumer Electronics Show on Monday, the company unveiled its Internet television service, a $20-a-month alternative to cable that’s the most ambitious play for cord-cutters to date. The service, confusingly, is named Sling TV, even though it has no direct connection to the Slingbox, another device aiming to appeal to people fed up with the restrictions of cable. Sling TV will be available on a range of connected televisions, streaming boxes and sticks such as Roku, and mobile devices.

Dish has been working on the service for four years, says Joseph Clayton, the company’s chief executive officer. It spent much of last year lining up deals and developing technology to insert targeted ads into live streams. The company had originally said the service would be ready in 2014. A lot was happening while Dish was putting the finishing touches on Sling TV. HBO and CBS announced they would begin selling standalone streaming subscriptions, and Sony launched PlayStation Vue, its own cable replacement service.

Dish’s big advantage is a deal with Disney, giving it access to ESPN’s channels, which are arguably a necessity to draw viewers away from cable. The basic Sling TV package offers about a dozen channels, including Disney, ESPN, Food Network, HGTV, TNT, CNN, and TBS. It also features Internet video from Maker Studios, which Disney bought for $500 million last March. Viewers will be able to pay extra for additional channels grouped by themes like sports or children’s programming. For years, Internet television services have struggled to get off the ground because they couldn’t get rights to content. The introduction of Sling TV is evidence that this is changing.

What the service won’t have are broadcast network channels. Dish is leaving those out to avoid paying hefty retransmission fees for content that’s available elsewhere. “It was a very strategic decision for us not to force people to pay for those networks again when they already have alternatives,” says Roger Lynch, a Dish executive who’s becoming Sling TV’s CEO.

For many viewers, the lack of broadcast content will make Sling TV just one part of a patchwork solution to television. “It’s going to confuse them, and in some instances upset them. They won’t understand the logic of it,” says Jimmy Schaeffler, an analyst with Carmel Group. “In the end, it’s a lesser product, but it works.”

As with any Internet television service, there’s a question of who the target audience is. Clayton says Sling TV will appeal mostly to millennials who currently aren’t paying anything for television. “This is a market segment that is not being tapped by the entire pay-TV industry today,” he says. But he also acknowledges that programming partners have expressed concerns that the cheap service will inspire people to move from more expensive subscriptions. “Quite honestly, I think there will be some cannibalization,” he says, “but not a lot.”

Aside from the subscription fees, Dish hopes to bring in significant revenue from advertising. One of the last things holding up the service’s launch was technology that allows it to insert advertisements into the live stream based on data the company has on viewers. This could allow Dish to charge more for ads. At some point, says Lynch, the company is likely to offer a free version of the service, minus the most attractive content like ESPN, supported entirely by ad revenue.

Dish is risking more by starting an Internet TV service than, say, Sony, which doesn’t have to worry about losing subscribers elsewhere. That said, change is coming whether pay television companies like it or not. Television subscriptions dropped for the first time in 2013. The number of people paying for satellite or cable continues to shrink, albeit slowly for now. Those viewers are migrating to Internet television, and Dish wants to be there when they do.