DENVER—Warren Schlichting, group president of Sling TV, presented a simple solution to the problem of rising retransmission fees: Don’t pay them and incorporate free OTA signals instead.
Schlichting said retrans totaled $215 million in 2006 and rose to $7.7 billion by 2016. By 2017, he said it totaled $10.93 billion, indicative of what he called “incredibly aggressive retrans fee hikes.”
At the same time, pay-TV subscribers are declining, so Schlichting said lower demand should mean lower prices, but it doesn’t. And that results in providers having to raise prices.
“With every price increase we push more subscribers away,” Schlichting said.
One of the keys to Sling TV’s $20 entry price point is that the service doesn’t include local affiliates. Schlichting said Sling TV thought it would launch with local channels, but at some stage his team asked why do that when retransmission fees are crazy.
Today, there are about 5 million vMVPD subscribers and about half of them have antennas. Schlichting said about half of Sling TV’s subscribers use OTA antennas as well. While the 11 million homes that use only OTA antennas has stayed flat, the total of U.S. households using OTA antennas has doubled in past four years. And 20% of U.S. broadband homes used an OTA antenna to watch live TV in 2017.
According to Schlichting’s math, customers can save $12 a month by not taking local channels and that it could be $15 next year.
“We don’t know where it’s going to stop,” Schlichting said.
Sling last year released a streaming box called AirTV, which is specifically designed to integrate OTA signals into a channel guide alongside popular OTT apps like Netflix. Schlichting said younger demographics are rapidly adopting OTA antennas and that business and technology strategies for pay TV providers and programming going DTC have to incorporate OTA.
Schlichting admitted its foray into streaming boxes may not be lucrative.
“We won’t get rich off selling the AirTV box; in fact, I don’t know if we’ll even make money,” Schlichting said. But he promised incorporating OTA can help fight off rising retrans fees and appeal to users who are rediscovering antennas.