Add one more option to cord-cutters' lists: Sony's (NYSE:SNE) PlayStation Vue streaming service recently launched nationwide.
The service acts as a full-on replacement for cable or satellite television, streaming live feeds from networks like ESPN or TLC over the Internet. Dish Network (NASDAQ:DISH) previously launched its Sling TV service nationwide at the beginning of last year. Vue got held up trying to negotiate rights to local broadcast affiliates for over-the-air broadcasters like NBC and ABC. That's what has reportedly stalled Apple's (NASDAQ:AAPL) plans to launch a streaming television service.
Sony never negotiated the rights to broadcast affiliates outside of markets where the affiliate is owned by the parent company (e.g. New York, Chicago). Instead, it's launching Vue with access to on-demand programming from ABC, NBC, and Fox, while offering a price cut over markets with full streams. This solution may in fact be preferable for cost-conscious cord-cutters, who can otherwise pick up live feeds from those channels with a set of rabbit ears.
What is Vue's market?
PlayStation Vue isn't targeted exactly toward cord-cutters. Instead, it's targeted toward consumers that are tired of cable companies with hidden fees, sudden price changes, and contracts that don't let you change providers. Dish is targeting a similar crowd with Sling TV. They're cable replacements, not cable substitutes like lower-cost services such as Netflix and Hulu.
To that end, their market is essentially the same as traditional pay-TV providers. And that should make pay-TV providers very worried. PlayStation Vue is undercutting most of the competition. In its highest tier, Vue offers 100+ channels for just $45 per month ($55 in markets with local broadcast networks). That includes a cloud DVR with unlimited recording space, so subscribers never miss a show. Vue services start at just $30 per month for about 55 channels, including the most expensive channels like ESPN, Disney Channel, TNT, Fox News, Fox Sports 1, USA, and TBS.
There are a couple catches. Currently, users can only stream Vue on a PlayStation 3, PlayStation 4, Amazon (NASDAQ:AMZN) Fire TV, or iOS device. There's no support for other set-top boxes, tablets, smartphones, or even PCs. Additionally, some channels are limited to in-home viewing. Sling TV, comparatively, is available across all devices and all Internet connections. Of course, compared to traditional pay-TV, which is tied to semi-locked set-top boxes and also limits some channels to in-home viewing on TV Everywhere apps, Vue is just as good, if not better.
The real threat
PlayStation Vue isn't just undercutting the competition, it's showing other companies the viability of the market. If Vue is a success, even without the rights to stream local broadcast affiliates in every metro area, it may encourage Apple to go ahead with its plans to launch a similar streaming service. Amazon is also reportedly planning to develop a live TV streaming service to complement its Prime Instant Video property.
These types of services have relatively low overhead cost and are instantly scalable compared to traditional pay-TV. There's no need to lay fiber-optic cable like telcos did last decade in order to compete with cable, and there's no need to send someone out to new subscribers households to install a satellite dish or connect the cable. All the infrastructure necessary already exists and is available for purchase in quantities as small or as large as needed. Amazon, owning the largest cloud platform in the world, is in an especially strong position to support a streaming service at relatively low cost.
So, the real threat comes not just from Sony's PlayStation Vue and Dish's Sling TV, but from the potential for other companies -- non pay-TV providers -- to enter the market as well, competing on cost, convenience, and potentially offering a better product.
Adam Levy owns shares of Amazon.com and Apple. The Motley Fool owns shares of and recommends Amazon.com, Apple, 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.