DISH Network (NASDAQ:DISH) announced a purely Internet-based, live, over-the-top streaming television service at the 2015 Consumer Electronic Show last week. The product, Sling TV, offers access to a handful of popular cable channels, including ESPN, without requiring a wired or satellite "cable" subscription.
The first-of-its-kind service costs $20 a month and gives subscribers full streaming access to "12 Nielsen-rated sports, lifestyle, family and news networks: ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Travel Channel, Adult Swim, Cartoon Network, Disney Channel, ABC Family and CNN," according to a press release. The service also offers some on-demand content as well as access to paid movie rentals.
The announcement was heralded as another another step toward the demise of traditional cable television by many in the media. It also left open questions as to whether DISH was undercutting itself.
Company spokesperson John Tagle spoke with the Fool at CES to explain how it sees Sling TV and where it fits into the company's plans.
The company is targeting Millenials
Sling TV is not for everyone. It's squarely aimed at Millenials -- the younger users who have been cutting the cable cord in increasing numbers. Going after that audience helped DISH decide what content should be included in the $20-a-month offering.
"These are probably the premier channels that the Millenial audience, which is the key group that we're going after," he said. "Probably the channel that they are most interested in is ESPN."
Sling TV also gives users access to the Watch ESPN app, which broadcasts a number of events to the channel's subscribers over the Internet. Sling TV is the first time ESPN's full content suite will be offered with a wired subscription.
Not offering networks is intentional
While older TV watchers (myself included at 41 years old) may question the value of a TV service that does not include any of the major broadcast networks, Tagle said DISH does not see that as an issue.
"While the major networks are something that the Millenial audience does consume quite a bit of, we know that they are already using a bunch of other forms to get that content," he explained.
Those methods can include setting up an HD antenna and watching network content through Hulu Plus.
"We know that they are accessing that content, so that hasn't been our major focus," he added.
Tagle did say the company "planned on having them in the future."
Not stealing existing customers
One of the key issues that has been stopping traditional pay television providers from launching purely digital services is that offering a cheaper alternative to your core product could cause customers to downgrade their subscriptions. Tagle said DISH did not see that as a risk.
"We know that the Millenial audience consists of over 10 million viewers or consumers, so part of what we're looking into is that we think there's a pretty great sweet spot to reach that market because they pay TV industry has typically under-served that audience," he said.
Basically, he explained that you can't lose customers you don't have in the first place.
"They've grown up without really being close to pay TV and we're trying to come up with a solution that can narrow in on that," he said.
It's not for everyone
What's perhaps most interesting about Sling TV is that it's a marketing play more than it is a pricing one. DISH currently offers a $29.99 a month satellite package that offers full online streaming of over 190 channels. Even if a customer had no interest in the wired part of the deal, he or she could have full streaming access to a ton of channels at that cost. The $29.99 is a promotional price, which rises to $54.99 in year two of the two year contract, but even averaged out that's a still reasonable $42.49 per month average cost for much more content.
It's clear that DISH isn't going after people who want the most value. It's trying to reach an audience that is skeptical of the traditional cable model and of signing long-term contracts,
Whether it works depends on whether this audience, which is used to either paying nothing for content or shelling out at most $8.99 a month for Netflix (NASDAQ:NFLX), is willing to spend $20 a month for ESPN and a handful of other channels.
Daniel Kline owns shares of Apple. He has a traditional cable subscription and a Netflix account he never remembers to use. The Motley Fool recommends Amazon.com, Apple, and Netflix. The Motley Fool owns shares of Amazon.com, Apple, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.