Skinny streaming-TV bundles seem like something consumers should want. These offerings let people cut the cord on their expensive cable and satellite services while still giving them access to a selection of popular television channels. Yet so far, the demand for products like DISH (NASDAQ:DISH) Sling TV or Sony's (NYSE:SONY) PlayStation Vue has been relatively tiny.
In this clip from Industry Focus: Consumer Goods host Vincent Shen is joined by Motley Fool contributing writer Daniel Kline to discuss AT&T's (NYSE:T) DirecTV plan to enter the skinny bundle space. Called DirecTV Now, the new streaming product, about which some details have been leaked, looks likely to be pretty similar to the DISH and Sony offerings, but with its own twist on the not-yet-successful category.
A full transcript follows the video.
This podcast was recorded on Nov. 8, 2016.
Vincent Shen: The new release coming from DirecTV, which is their DirecTV Now service. Some details have leaked out, in terms of pricing, some of the channels that are available, how it will work. Can you give us a few details on that?
Dan Kline: It's all a little bit sketchy, but it feels like it's between what Dish is doing with Sling. Sling is basically 20 channels for $20, and you can add $5 add-on packs. It's a little more than that now, but it's roughly that. Sony, which has pretty much a cable-like product starting at $39.99, going up to about $59 to $69. It appears it's going to be about $35 for the basic AT&T/DirecTV package, but we don't know what you're going to get. We figure you're going to get some of the channels you want -- ESPN, TNT, TBS, CNN -- and then you'll be able to add on other ones. So, it's kind of a mid-price product, and it's clearly a cord-cutter product. But I go back to what we talked about a lot. I still don't see who this is for. It's not that much cheaper than cable, and it's a lot less convenient.
Shen: I know that some of the initial reports indicate a package of as many as 100 channels, but that's not really what you're getting for $35, right?
Kline: Right, the 100 are going to be if you add on all the different add-on packs. I had a DISH subscription where I bought everything -- well, maybe not quite everything, I didn't get the Spanish language channels, but everything in a language I speak -- and it cost maybe $60. You add HBO, and you're at $75. So, you're not that different from the roughly $106 or something that average cable bills come out at. So, this is a case of, if you are a cord-cutter who wants access to certain programming, you can get it, but it's not going to be the cheapest service. It's sort of a middling service, and local channels are going to be very sparse. There are some local market deals, just like Sony has, where maybe in New York you can get NBC, and in Los Angeles you can get Fox. Even then, there's a lot of restrictions on what programming you get -- like, maybe you don't get NFL games, or maybe local something is locked out.
Shen: From my understanding, a lot of these services, as you mentioned, in terms of those major local networks, thinking about CBS and NBC, ABC, it does kind of depend on what market you're in. Sometimes, if you're in a larger metropolitan area, you might get them, but otherwise...
Kline: In a lot of cases -- like with the Sony offering -- you get access to, let's say, NBC. I believe NBC is a partner. You get access to their prime-time shows, but you could get those through other means -- at least eventually. What you don't get is the local news. So you're still missing out on the weather. Not that you can't get the weather other places, but school closings, and some of the things that make local TV convenient. Nobody has figured out how to put that into a digital package yet.
Shen: Sure. Another question, and another view into some of these services. With this DirecTV Now package, they can deliver some of the live content that maybe a lot of current viewers who are still attached to their linear cable packages have been hesitant to give up. Do you think that is a differentiator? Or is that something that, again, is just not maybe enough of the value compared to that basic cable package?
Kline: This is a me-too product. Every cable operator has some sort of skinny bundle, digital streaming product, somewhere in the works. Maybe somebody doesn't, but most of them do. What hasn't been shown is consumer demand. It seems logical that a younger person who has never paid for cable, or a family that goes, "Oh my god, my bill is too big," would say, "I want to spend $35 and get my favorites out of here." The problem is -- and I've written about this for families -- as a family, I have a wife and a child, and we all watch different things. So, I can't get the $20 Sling TV. I have to get everything they offer. It's going to be the same thing with this. So, as one person, or just you and your wife, this might make sense, especially if you don't have cable, and you want to watch basketball on TBS, and your wife wants to watch a couple of other shows. But these seem to me like very niche products, and they're being developed for market that has not proven to exist yet.
Shen: OK. Last question, and it's relevant to the very big announcement that AT&T had recently, regarding its $85 billion acquisition of Time Warner. How do you think, assuming that deal goes through and makes it through the regulatory hurdles, how does that play into this, in terms of their ability to offer some of that exclusive content from Time Warner? They have a pretty good portfolio, powerful networks and content.
Kline: I think the reality is, you can't make that much exclusive. Maybe you could take a specific artist you have under contract, and say, "We get a 90-day window on this." But it's not like you can take a cable network and say, "We're not going to sell it to the other 95 million cable homes." AT&T already has some of its own networks. It has the Audience network, which has Dan Patrick and a couple of other shows. And it's nothing that would change your mind on getting a subscription. So, I think there's an advantage in that they can make favored-nation deals for what they pay themselves, but probably a condition of that merger getting approved is that they don't do that, that if they're only going to charge themselves $1 for the channel for a digital subscriber, they're going to have to offer the same terms to DISH. They're not going to let AT&T-Time Warner strangle Sony, and DISH, and whoever else is coming down the pike.
Shen: My last question -- and this has to do with the bigger-picture view of this industry and where some of these packages and services are going. There was a Comcast-NBCUniversal deal. Now there's this potential AT&T-Time Warner deal. Do you feel like the fact that the distributors and the content creators coming together is eventually going to give them the ability to offer some of the a la carte packages that so many consumers have been begging for at this point?
Kline: I think we're going to see a lot of things go out of business. In the skinny bundle world, let's pretend I watch The Cooking Network, and maybe 200,000 people at prime time are watching it. But I'm not going to pay $6 a month to watch it. If you don't have to pay your $0.0005, or whatever the carriage fee is, to get it and not watch it, it's just going to go away. So yes, you might see some exclusive, really interesting content. But I think you're going to see more of the other edge as these things consolidate. Look at what's happening with ESPN. As less people subscribe, ESPN is going to spend less money on programming, or I'm going to pay more to get ESPN. At some point, they're going to lose some college deals, and things are going to spread out more. And it creates opportunity, but it's also going to put some stuff out of business.