For those looking to cut their monthly subscription pay-TV bills, Dish Network's (NASDAQ:DISH) Sling TV seems to be a game changer. The entry-level service of $20 per month delivers 20 live-streaming channels, including the heavily trafficked ESPN and ESPN 2 networks, with no installation or superfluous fees and without a long-term contract.
Compare Sling TV to other cord-cutting options, like Hulu, Netflix, and single network offerings (CBS All Access), and its value proposition becomes perfectly clear. For viewers, Sling is a cost-effective way to watch multiple networks, including live sports and television, on a scale competitors simply cannot match. And while Sling TV has been touted in the media as the future of cord cutting, there are trade-offs. Here's the good, the bad, and the ugly of Sling TV's April so far.
The Good: HBO Now is a go
For Sling TV, its continued growth hinges upon buy-in from not only subscribers (more on that later), but also from content providers. In the event that Dish is unable to convince -- or keep -- content partners to offer its services, the company loses its value proposition. Of course, there's a delicate balance between keeping its programming costs low and having top-notch content.
With Sling TV, incoming CEO Charlie Ergen has made it a point to mention the service is suited for millennials, and there's probably no channel more popular with the younger demographic than Time Warner's HBO. Not only did Dish secure programming rights, the company appears to have secured them earlier than expected and in time for the wildly popular Game of Thrones season five start.
Don't expect any deals here, though: Dish customers will have to pay an additional $15 to stream HBO via Sling TV -- the same price HBO set for its own, single-programming HBO Now streaming product.
The Bad: The incredible shrinking cap
For many observers, Dish's Sling TV was groundbreaking in the fact that the service actually exists. In the symbiotic relationship of content (TV channels) and delivery (cable and satellite providers), there's recently been a strain. Content has increasingly sought more ways to get to consumers (new pipes), while deliverers -- outside of Dish -- view those moves as detrimental to their business model. Charter Communications' Tom Rutledge stated those who sold their content via over-the-top (read: streaming) were "sewing their own seeds of destruction."
Content providers seem to acknowledge Rutledge is correct. The large, bloated pay-TV package has been lucrative to content providers, and they really don't want to kill the golden goose. And it appears they are hedging their bets with Sling. Although they have agreed to provide content, many have agreements to discontinue content if Sling gets too popular.
Dish apparently doesn't want Sling TV to become too popular, either. Whereas one report cites that Dish must limit Sling TV's total subscribers to 5 million to placate content providers, a report this month from Ad Age puts the total at a much smaller 2 million subscribers. Caps and agreements have a propensity to change, but one wonders how groundbreaking a service can be that's capped at less than 2% of the pay-TV market.
The Ugly: NCAA March MADness
As only one company in the greater pay-TV industry, especially one that's attempting a new delivery model, trade-offs are to be expected. Caps, lack of buy-in, and tense negotiations with content providers are only natural in this situation. However, as far as delivery of that content is concerned, it is Dish's sole responsibility to ensure its users get a clear signal and strong viewing experience; the company failed in its biggest test to date. In the University of Wisconsin vs. University of Kentucky college basketball game, strong demand led to poor streaming quality. Eventually, the company apologized on Twitter for the experience.
Recently, Re/Code reported Sling TV has roughly 100,000 subscribers, a pittance of Netflix's daily streaming audience. In the event they grow to the previously mentioned 2 million subscribers, will the company be able to handle a highly watched live event? Of course, the company has time to work on these issues, and the fervor will die down, but in its first big test the service came up short.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Netflix and Twitter. The Motley Fool owns shares of Netflix and Twitter. 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.
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