DISH (NASDAQ:DISH) and its Sling TV subsidiary made waves recently announcing a $20 monthly offering that allows subscribers to watch a sampling of cable TV channels across various device types. Sling TV's move is a clear result of cord-cutters demanding robust options outside of the traditional pay-TV model. While Sling TV is answering the calls of consumers for unbundled content -- such as Disney's (NYSE: DIS) ESPN -- does the announcement really mean cable's gravestone is being carved as we speak?

Motley Fool tech analyst Nathan Hamilton attended International CES 2015 -- where Sling TV made the announcement -- to gather more details for investors and cord-cutters.

In the following video, Mr. Hamilton and fellow Fool Sean O'Reilly dive in to provide investors with the implications for Sling TV and the cable industry, in addition to trends worth watching in coming years.

TRANSCRIPT

SEAN O'REILLY:

Greetings, Fools. Sean O'Reilly, here, with the one and only Nathan Hamilton who left me behind in cold Washington, D.C. to visit CES in Las Vegas.

NATHAN HAMILTON:

I did. I did.

SEAN O'REILLY:

It snowed. There was ice.

NATHAN HAMILTON:

Yes.

SEAN O'REILLY:

It was 20 degrees.

NATHAN HAMILTON:

Yes, I should have sent you some pictures while I was there. It was a great time.

SEAN O'REILLY:

You should have brought me some warmth or winnings or something. I don't know.

NATHAN HAMILTON:

Yes, I tried.

SEAN O'REILLY:

The most important thing is you brought a lot of good Foolish content and knowledge back for all of our listeners.

NATHAN HAMILTON:

No doubt about it. I found a lot of tech, interviewed a lot of people, and took a lot of pictures.

SEAN O'REILLY:

Played a lot of craps…

NATHAN HAMILTON:

Played a lot of craps. Won some money while I was there, so overall a good trip.

SEAN O'REILLY:

Very good. Well, today we wanted to talk specifically about Sling, which was actually one of my favorite announcements out of CES. Because of the price point. Just what it means. All this stuff. So, [we're all] dying to know. Is this finally the death of cable?

NATHAN HAMILTON:

I'm going to say no at this point…

SEAN O'REILLY:

(Gasps)

NATHAN HAMILTON:

…but just to give some background for our listeners who may not be familiar. DISH TV came out with their Sling TV service. Essentially it's an over-the-top streaming service where for twenty bucks a month, you get access to a lot of the great channels out there which unbundled packages don't offer right now. So, Food TV? A big Food TV fan?

SEAN O'REILLY:

Oh, man.

NATHAN HAMILTON:

ESPN. That's kind of the big one. Home & Garden TV. A lot of other channels, as well. But it does not include, say, your local news channels or anything related to that.

SEAN O'REILLY:

Right. What are we looking at? You're getting this for $20, but a lot of other packages, like the basic cable packages, don't cost that much more than that. So, what's DISH thinking here?

NATHAN HAMILTON:

I think it's a marketing play and kind of a jumping-off point where essentially Sling TV is meant to target a specific audience. There's a quote from Sling TV, specifically, and I'll read it off here. It's from Roger Lynch, the head of Sling TV, and this is at his presentation at CES.

He said specifically, "We're not looking to replicate traditional pay-TV over the Internet. That's a well-served market by DISH and other competitors. It's also a saturated market and frankly, a declining market. We're going after the growth market, which is millennials."

SEAN O'REILLY:

Got it. So, basically kids ages 21 to 35 that are literally going out of television.

NATHAN HAMILTON:

Yes. What I believe in his comments — and what I think is a little more PR spin — is yes, going after millennials. DISH offers 120 channels, already, for an introductory rate for the first 12 months…

SEAN O'REILLY:

Right.

NATHAN HAMILTON:

You get how cable companies and satellite companies work.

SEAN O'REILLY:

[00:02:40] cancel in mind.

NATHAN HAMILTON:

Yes. $34.99 for 120 channels. Sling TV is $20 for a lot fewer channels.

SEAN O'REILLY:

So, per channel, this is not as hot a deal as one would think.

NATHAN HAMILTON:

No, it's not, but you have to look at why they would do that. They're going after a very specific — I don't know if it's a niche at this point, but a very specific market which are the millennials that maybe don't have pay-TV subscriptions. You mentioned before "death of cable." I don't think this is…

SEAN O'REILLY:

We're all waiting.

NATHAN HAMILTON:

And the death of cable is not an immediate thing that happens.

SEAN O'REILLY:

It's probably been kind of a misnomer, too, because even if we all stop watching cable and started watching things on the Internet, or something like that, we would still need the Internet and all these cable companies own the cables into our house that last mile.

NATHAN HAMILTON:

Yes, millions of people don't all of a sudden, when Sling TV comes out, cut their cable and start paying $20 a month for Sling TV. It's just not the reality of what happens. You also have to look at what this is for. It's for millennials. It's targeted at that market. Is it officially an unbundled pay-TV package? My argument would be no, because they're bundling a few channels together and having you pay $20.

SEAN O'REILLY:

That's called a bundle.

NATHAN HAMILTON:

Exactly. So, you have to look at, as well, that one of the big complaints with cable subscribers is, "Hey. You hit me with fees." Some can argue whether Sling TV is adding fees, but to get additional packages of content, like a kid's channel package, it's $5. You're kind of bundling the things along, so it's not the end-all, be-all unbundled package, death of cable, or anything like that. It's really just, "We've got our regular offering. We want to expand into a growth market," as Roger Lynch said, "and really tap that opportunity."

SEAN O'REILLY:

Very good. So, what would the bottom line be for people that were not at CES?

NATHAN HAMILTON:

It's a step in the right direction. As I said, a jumping-off point for the changing model. Death-of-cable share — I know we've said that a lot, so far — the model really is changing and that's based upon consumer demand. We've got our phones. We've got our tablets. We've got our desktops. We've got our laptops. We're mobile. We consume. We watch content across many devices. And as the existing model stands, it's going toward that, but it's really not there. You've got the cable…

SEAN O'REILLY:

So, a stepping stone. Not a revolution.

NATHAN HAMILTON:

Yes. You've got the cable behemoths there, as the aggregators, and there's the traditional service. That works. People are still paying for it. Cable companies are making a lot of money, but they're also going after these newer opportunities [where] they're starting to gain traction. This is one indication that it's moving in that direction.

I would say watch the trends, as a whole. See what the Netflix's of the world are doing. What's HBO doing? Are other companies coming out with similar services? That's what you really have to pay attention to and see if it actually puts a dent in the financials of these big cable companies that have tremendously strong free cash flow generation.

SEAN O'REILLY:

For sure. All right. Well, thanks for sharing.

NATHAN HAMILTON:

Absolutely.

SEAN O'REILLY:

Thanks for listening, everybody, and Fool on!

[End]


Nathan Hamilton has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Netflix and Walt Disney. The Motley Fool owns shares of Netflix and Walt Disney. 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.