Let's be realistic for a moment. Cord-cutter's have no true unbundled option that delivers the value of a pay-TV cable subscription. But the times are a changing ...slowly.
DISH (DISH) subsidiary Sling TV made waves at International CES 2015 becoming the first provider to offer a relatively viable over-the-top service that includes some of pay-TV's most desirable content, including Disney's (NYSE: DIS) ESPN network. Cord-cutters can rejoice over the available channels, but what does it mean for cable industry investors?
Motley Fool tech analyst Nathan Hamilton attended CES 2015 to get a better understanding of what trends are driving the industry. In the below video, he interviews Sling TV's representative at CES and discusses the takeaways with fellow Fool Sean O'Reilly.
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TRANSCRIPT
SEAN O'REILLY:
Greetings, Fools. Sean O'Reilly, here, and I'm with the one and only Nathan Hamilton who left me behind in cold Washington, D.C. to visit CES in fabulous Las Vegas.
NATHAN HAMILTON:
I wish you could have come along with me.
SEAN O'REILLY:
I'm very mad at you.
NATHAN HAMILTON:
I had a good run at the craps table. Put it that way.
SEAN O'REILLY:
You're kidding me? I actually was sitting here. I was [thinking], "What's he going to play? Slots? Blackjack? Poker?" I did not know you were a craps man.
NATHAN HAMILTON:
Not a slots guy. That's kind of boring for me. I like playing at the craps table.
SEAN O'REILLY:
Come on, snake eyes?
NATHAN HAMILTON:
Yes, we had a good run and then I gave up most of it at the end.
SEAN O'REILLY:
Well, if you can break even in Vegas, technically that's a win.
NATHAN HAMILTON:
Yes. I did see some cool tech, though.
SEAN O'REILLY:
Really? Oh, well, yeah. While I was gambling, I also wandered into these booths and everything. And for our listeners that haven't been seeing the other videos we've [done], he's actually spent a good amount of his time viewing future technology.
NATHAN HAMILTON:
Yes.
SEAN O'REILLY:
One of those things was you talked to a gentleman from DISH Network [about] their new product, Sling. What can you tell us about this?
NATHAN HAMILTON:
I spoke with Max Orcutt. He's a representative with DISH Network and Sling TV. I'll actually play the interview for our listeners, here, and then we'll provide a little bit of commentary on it.
SEAN O'REILLY:
Very good. Here is the interview.
NATHAN HAMILTON:
Nathan Hamilton, here, with The Motley Fool. I'm joined by Max Orcutt with Sling TV. How are you doing today?
MAX ORCUTT:
I'm well. Thanks for having me, Nathan.
NATHAN HAMILTON:
Sling TV — it seems that there's a lot of buzz going around International CES 2015. Can you tell us a little bit of why there is that buzz right now?
MAX ORCUTT:
Well, this is a really exciting product. For $20 a month, you can lose the cable company and see all of the live sports and really some of the best Internet programming and the best programming on TV available to consumer-owned devices, whether it be a tablet that you already own or a multitude of streaming players that we're available on.
NATHAN HAMILTON:
I guess looking at Sling TV, not so much a brand new technology. This is somewhat of a — I don't know [if it's] a watershed event — but a very important event. Could you dive into the details of whether it's the content network or why it's such a big deal at this point?
MAX ORCUTT:
I believe it's such a big deal because this has really never been done before. Our partnerships are just brand new and exclusive, and this is a whole new industry that we're paving the way for. So, I'm really excited to see how this is going to take off and I think the consumer is going to respond well when they see how much great content is available to them for such a reasonable price point.
NATHAN HAMILTON:
And not to mention, of course, you've got ESPN going over the top. It seems like that's a pretty important moment.
MAX ORCUTT:
Yes.
NATHAN HAMILTON:
So, looking at the actual streaming options, what do we have? I know you've got Roku. Possibly Amazon Prime. Is there anything else we're missing?
MAX ORCUTT:
We do have the Roku. We have the Amazon Fire TV and the Fire TV Stick. Xbox. The Google Nexus Player and then Mac PC, Android tablets, Android phones, and iOS tablets and iOS phones. We're really trying to be ubiquitous. If you have the device, we'd like to be there.
NATHAN HAMILTON:
Well, I appreciate your time.
As you can see, Max touched upon Sling TV and what the big deal is at CES because actually on the floor at CES and looking at what was happening in the media at the time, it was a big announcement.
Why I think it's a big announcement first off — and Max touched upon it a little bit — is this is the first time that ESPN, as a whole, is going streaming over the top. Essentially you're not having to pay for a contract…
SEAN O'REILLY:
Right…
NATHAN HAMILTON:
…to get access to ESPN, because it is the highest-cost television network.
SEAN O'REILLY:
Yes, I was actually surprised, myself. It's got 11 or 12 channels, [and] the average cost per subscription for cable for ESPN is like $5-6. So, Sling is going to cost $20. I'm like, "Wow. ESPN's willing to…" Though I imagine they're not getting a fourth of that money.
NATHAN HAMILTON:
Yes. I mean, who knows. I heard rumors — and can't say whether this is true or not [as it's] purely a rumor — that Disney, provider of ESPN and ABC and so forth, could actually cut its partnership with Sling TV if the subscriber numbers really get up there.
SEAN O'REILLY:
Oh. So, if you go get too many people, we're out.
NATHAN HAMILTON:
Yes. We want you to do good — but not that good.
SEAN O'REILLY:
Well, that's actually kind of… I don't know.
NATHAN HAMILTON:
Yes, it's amazing. But like I said, just a rumor. You have to look at …
SEAN O'REILLY:
Right…
NATHAN HAMILTON:
…just the whole announcement and what it means. Essentially, 2013 was the first year that cable companies, as a whole, saw cord-cutting officially take place. There were net losses for subscribers. There hasn't been that go-to, "cut the cord. You'll get everything at this point." Sling is a movement toward there, but it's really not.
SEAN O'REILLY:
And it's not even targeted towards the average American household. There's actually a specific demographic that it's going for.
NATHAN HAMILTON:
Yes. It's meant for you and [me] — millennials and so forth. It's not meant for anybody that is a longtime pay-TV subscriber…
SEAN O'REILLY:
Right…
NATHAN HAMILTON:
…but somebody who watches the news, ABC, and so forth. NBC. I don't think it's targeted toward them.
SEAN O'REILLY:
Yes. So, how does this factor in with other channels that I may want, like HBO?
NATHAN HAMILTON:
HBO has announced that they're going to do something similar and have a standalone service, potentially in 2015, so we're watching to see if that happens.
SEAN O'REILLY:
Very cool. So, most of our listeners, of course, are investors, because this is The Motley Fool. What can Comcast, DISH Network, [and] all cable investors take away from this? Is this it? Is this the death of cable?
NATHAN HAMILTON:
It's really broad. You have to look at [whether] you are a Netflix investor, Are you a Comcast investor? Are you in Verizon? There are a lot of different ways to play it. Ultimately, I think it's a matter of just paying attention to the broad trends. So, 2013 was the first year where a cable company saw net losses in subscribers. Okay, this 2014 is going to be the same. That's one thing to watch.
You also have to look at cable churn rates. Are these new announcements or new offerings that are coming out actually resulting in people cutting the cord and just going streaming or over the top? Or are they using both services? In that case, it's kind of a win-win for both, because they're increasing the amount of money that you and I are spending for the telecom and cable industry as a whole.
So, you really have to look at those broader trends to see how it is affecting investors. But you don't hit this inflection point where cable's dead.
SEAN O'REILLY:
Automatically.
NATHAN HAMILTON:
Yes. Really it takes time, and Sling TV is just one sort of movement toward that goal, because the model is changing. How we consume content…
SEAN O'REILLY:
Right.
NATHAN HAMILTON:
…is different now than it was even five years ago.
SEAN O'REILLY:
Very good. Well, thanks for sharing, Nathan.
NATHAN HAMILTON:
Absolutely.
SEAN O'REILLY:
Thanks for listening, Fools, and Fool on!
[End]
