With 14 million subscribers, Dish Network (NASDAQ:DISH) is one of the largest providers of paid-TV in the United States. So it's somewhat surprising that its newest initiative -- Sling TV -- is a service aimed primarily at cord-cutters.
Launched early last month, Sling TV offers subscribers a variety of channels delivered over the Internet -- primarily to mobile devices, but also to streaming set-top boxes and (soon) video game consoles. Sling TV is headlined by Disney's (NYSE:DIS) ESPN and ESPN2, but also includes AMC, TBS, TNT, Food Network, and HGTV, among other channels.
In a recent phone interview, Sling TV's CEO, Roger Lynch, told me how he thinks about the future of television, and how he expects the paid-TV landscape to change in the years ahead.
The bundle will evolve
Unfortunately, Sling TV doesn't offer the sort of a la carte future many cord-cutters pine for. It's still a bundle of channels -- like any traditional cable package -- but it's a smaller, more focused bundle, offering subscribers a greater degree of choice.
In contrast to a standard cable package (which may cost upwards of $100 per month, and include hundreds of channels) Sling TV sports only 15 channels but costs just $20 per month (a price point Lynch described as "very important") -- a sort of miniature bundle. Sling TV offers add-on packages, each for an additional $5, but does not sell any channels individually.
Lynch expects more of this from the industry -- not necessarily a la carte offerings, but smaller bundles with greater flexibility.
"Right now, most providers are basically offering the same package of channels. There isn't much segmentation in the industry ... [But in the years ahead] there will be more segmentation ... more choice."
Although most paid-TV providers offer their customers several different tiers of service (Dish Network itself currently offers four distinct packages), there isn't much customization. Paid-TV tiers are framed in a good-better-best format, with little regard to individual preferences or interest. There's rarely a package aimed at sports enthusiasts, for example, or one aimed at children. Sling TV, in contrast, offers both, and Lynch believes this is one innovation that the rest of the industry will adopt.
Over-the-top will take a bigger share, but not every network can go directly to consumers
Delivered over the Internet, Sling TV is the latest example of the growing number of over-the-top, paid-TV alternatives. Others include Netflix, Amazon Prime, and Hulu, and more are forthcoming, including PlayStation Vue and HBO's Internet service.
Lynch believes over-the-top providers will play an increasingly important role in the paid-TV space, but does not expect them to replace traditional providers altogether: a trend he calls "over-the-top plus."
If over-the-top does emerge as the dominant source of paid-TV content, Lynch believes traditional providers like Dish can still remain relevant. I asked Lynch why, in an over-the-top world, networks couldn't go directly to consumers themselves -- why couldn't Disney, for example, simply sell access to its WatchESPN app?
"Some brands could," Lynch admitted. "But Netflix invests a lot in technology ... [Networks] specialize in creating great content. [We] specialize in technology, customer care, marketing."
Linear programming will remain relevant
One of the side effects of the increasing importance of over-the-top services has been a decline in real-time (linear) viewing. According to Parks Associates, Americans now spend about half their television time watching non-linear programming, and among 18 to 34 year olds, it's the majority.
While it's an undeniable trend, and one Lynch expects to continue, he still believes there's a place for traditional broadcasts.
"Linear will still be relevant ... [primarily for] event programming and sports ... particularly among Millennials, there's value in watching something live. Commentating on social media, participating in the discussion."
That may be the single biggest draw of Sling TV -- unlike its competitors, it's currently the only over-the-top service that offers live sports.
Not a replacement for cable
It may not be perfect, but Sling TV is undeniably a major step forward in the evolution of the paid TV industry. It also gives Dish Network a way to take advantage of the industry trend toward over-the-top viewing.
But it's not a replacement for a full-featured cable package -- and that's intentional. Lynch offered no firm subscriber goals, and when I asked him about PlayStation Vue (what could be Sling TV's biggest direct competitor) he said that, unlike Sony, he wasn't interested in offering an online alternative to the traditional cable package.
Perhaps that's to be expected from a company that's firmly entrenched in the current paid-TV model. But if you want ESPN without the expensive cable bundle, Sling TV is currently the only way to get it.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, AMC Networks, Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, AMC Networks, 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.