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Dish's Decision to Freeze Sling TV's Price Is Savvy, But Not Enough

By James Brumley – Jul 8, 2020 at 9:00AM

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The robust streaming platform is out of place, neither being a complete cable package nor a low-cost a la carte option.

Kudos to Dish Network (DISH 0.93%) for capitalizing on a price increase of a competitor's streaming cable service by vowing to not raise customers' prices for a year. Anything that will distinguish one's service from another in a way consumers clearly love is just smart thinking. Unfortunately, the move isn't apt to change the fate of Sling TV, Dish's streaming cable option. It continues to lose subscribers.

Zigging when they zag

The competitor in question who is raising prices is Alphabet (GOOG -1.65%) (GOOGL -1.40%). After adding several ViacomCBS (PARA 3.13%) (PARA.A 2.72%) channels to its streaming cable lineup available in a package called YouTube TV, the company upped its monthly price by $15, to $64.99.

At that price, however, the alternative to traditional cable starts to feel like the expensive cable services that prompted some consumers to "cut the cord" and search for cheaper options. A similar service called Fubo did the same at the same time, upping the monthly price for its live streaming family bundle to the same $64.99.

A person holding a remote in front of a TV.

Image source: Getty Images.

As expected, customers of both services were displeased; some may have even begun shopping around for alternatives. Dish gave them a good one to think about.

In a blog post penned the day after YouTube TV's price went up, Dish explained: "Customers who sign up for SLING TV or who have an existing SLING TV account by August 1, 2020, can lock in their current price on any SLING TV service through August 1, 2021." That means Sling TV's monthly cost will hold steady at its current monthly price of $30 for at least the next 12 months. The post added (in a not-so-veiled shot at Fubo and Alphabet): "[W]e believe that now isn't the time to make you choose between staying informed and entertained, and putting dinner on the table."

The tactic will likely lure some defectors to Dish's Sling service. It probably won't, however, alter the trajectory of Sling TV's shrinking customer base.

That's not how people watch these days

Sling TV's platform falls somewhere between the typical movie and TV series venue like Netflix (NFLX -1.26%) and conventional cable, which offers a full array of live television options including local news and sports. Non-local channels like A&E, CNN, the History Channel, and TNT serve as the foundation for both of its core packages. In fact, Sling's website recommends that current and prospective customers use an aerial antenna to enjoy local broadcasts. It will even help those users tune into their local stations.

This arrangement faces the same headwind any other streaming service faces though, whether that service is a robust offering including all sorts of sports, or purely an on-demand platform meant to pipe in movies and shows a la Netflix. That is, consumers are content to piece together their own entertainment package from the myriad of options available to them now.

One only has to look at Tivo's first-quarter video trend report to fully appreciate this premise. The DVR and set-top box brand found that even among cable customers, consumers most frequently augmented that service with a combination of YouTube and Netflix. For consumers that didn't pay for traditional cable service but still subscribed to broadband, a combination of YouTube, Netflix, and Prime from Amazon (AMZN -0.82%) was the most common arrangement.

Even more telling: The average cable customer regularly tuned into nearly seven different sources of video entertainment. Non-cable customers watched almost five different video venues on a regular basis. That's a lot of competition for Sling TV to face, particularly when it operates in a proverbial no man's land -- between being a full-blown cable service, and being a true a la carte option.

And its subscriber numbers show it.

Sling TV made a respectable showing through the middle of 2019, slowly but steadily adding customers through the third quarter subscriber surge -- a surge the company attributes to "effective promotion and more flexible value proposition." But not only was the growth pace not sustainable, since then the company's begun to lose more Sling TV users than it's been able to add. Not even March's coronavirus lockdown orders were enough to prompt bored consumers to give Sling a try.

Dish Network's Sling TV subscriber count peaked in Q3 of 2019, and has been falling ever since.

Data source: Dish Network quarterly reports. Chart by the author.

Perhaps that reversal had something to do with Sling's price increase that went into effect at the beginning of this year, or perhaps the advent of Disney+ from Walt Disney (DIS -0.84%) in November was a factor. More plausibly, however, it was a combination of both at a time when the a la carte streaming media market is starting to mature. Sling TV has been one of the platforms TV watchers are increasingly finding they can live without, although it's not alone in that regard.

Looking ahead

It's possible Dish's Sling TV had a much better second quarter than first quarter, as consumers better figured out how to keep themselves entertained while stuck at home. And, as was noted, price increases from YouTube TV and Fubo TV will certainly drive some new customers in Sling's direction.

But not being a complete live cable alternative, and also not being a low-priced option like Netflix (and also not being a narrowly focused platform like Disney+), consumers may be struggling to figure out exactly where Sling fits into their custom-built video plans. That's especially true given how video content from several key Sling channels like AMC, A&E, and Discovery is also available through other, less expensive platforms like Amazon or Disney's Hulu.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Netflix, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney, short July 2020 $115 calls on Walt Disney, long January 2022 $1920 calls on Amazon, and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.

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