Cut-rate bundles are not a valid competitive response to Sling TV

Daniel Frankel, FierceCableI've read dozens of varying reviews of Dish Network's (NASDAQ: DISH) new OTT service, Sling TV, on tech blogs, media news sites and mainstream newspapers.

The unifying gist I get is that the product is technologically elegant, but lacking in the breadth and depth of programming necessary to render it "game-changing."

I haven't actually been able to experience the product myself. (A review password finally arrived in my email box this morning.) But as I peruse Sling TV test drives on platforms like the Montgomery Advertiser and TechHive, my bruised ego remains in check enough to say that it all sounds game-changing enough to me.

As a DirecTV (NASDAQ: DTV) subscriber, it has taken me years and thousands of dollars in monthly fees to finally view Watch ESPN on my iPad. Heck, until DirecTV's new deal with Disney kicks in, I still can't. I can do that on Day 1 with Sling TV.

But forget my growing lack of confidence and reduced affinity for TV Everywhere. I see Sling's key differentiating factor as being that it's a true IP programming service, easily enjoyed on any device, and just as easily cancelled. It's a "tech" product, offset through marketing from the terms "pay-TV" and "cable," which are pejorative in Sling's broadband-loving target market.

In creating a new division for Sling TV and giving it a name streamers are already familiar with, Dish chairman Charlie Ergen seems to understand a fundamental concept of marketing to a younger generation that thinks it invented the Internet: you're not going to appeal to them by threatening to drive an installation van up their house.

With only a dozen channels currently in its $20-a-month base package, it's questionable as to whether a coalescence of consumer popularity will lead to a greater content selection … which will, in turn, lead to yet more growth in consumer usage.

But I gotta say I'm a bit surprised by the cynical reaction of rival pay-TV operators. Take Time Warner Cable (NYSE: TWC) CEO Rob Marcus, for example. During TWC's Jan. 29 fourth-quarter earnings call, Marcus was asked about Cablevision's (NYSE: CVC) announcement 48 hours earlier of the first Wi-Fi-only smartphone, Freewheel.

Now, of course, the CEO wasn't going to declare that a rival had come up with sliced bread. But as an executive vested in a Wi-Fi future himself, Marcus gave Freewheel its props for innovation, noting, "I think it's pretty cool."

Asked by another investment analyst moments later about Sling TV, Marcus turned dismissive.

"I'm a little bit skeptical in that," he said. "I think we've got a more compelling [offering], like if you will, a bundle that happens to be called our starter video product for about the same price, but with many more highly rated networks. So I think we'll watch, and we're certainly interested in more flexible packages. But I'm not sure if that's the right one."

Marcus' comments echoed those spoken last fall at an investment conference by Charter (NASDAQ: CHTR) CFO Chris Winfrey, who said that if programmers wanted to go dipping into skinny OTT bundles, "We could do a better job of packaging content to the subscribers we know well in a way they would actually desire."

For its part, DirecTV (NASDAQ: DTV) has already put that mantra into a marketing campaign, announcing a $19.99 promotional rate for a satellite package that includes more than 130 channels.

"In their haste to cut the cord, some TV consumers run the risk of cutting something else--their entertainment choices," DirecTV writes in an advertorial pitch for the skinny product headlined "Dish's Sling TV: Game-Changing or Shortchanging?"

I don't think they get it.

Whether or not Sling TV ends up changing the game, Dish is getting all kinds what Ergen likes to call "learnings"--everything from streaming technology to targeted advertising via IP to basic marketing to millennial-aged consumers.

Perhaps more importantly, Dish is getting out of the way all the program licensing deals needed to make such a service a reality.

If and when the world does move to a place in which all video is delivered over the Internet, that's a distinct advantage. And Dish's competitors are just shortchanging themselves by not trying answer Sling with their own OTT products.--Daniel

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