AT&T just celebrated the one-year anniversary of its DirecTV Now launch, touting a 1-million customer milestone, as well as the pending deployment of a new technology backbone for the service.
With pay-TV subscribers dropping AT&T linear services in favor of the virtual MVPD platform with far narrower margins, AT&T management has even outlined a plan: Margins will eventually even out, as the platform exploits advanced advertising capabilities and drives business for AT&T’s wireline and wireless broadband networks.
Over at rival Dish Network, management is prepping for its own anniversary. This coming February, it will be three years since Dish launched the very first vMVPD, Sling TV. Analysts believe the platform has also been successful at building a user base, with their consensus estimate for Sling TV coming in at around 2 million customers.
But as it approaches its fourth year, Dish’s objectives and prospects for its virtual pay-TV platform are relatively unclear.
Whereas AT&T has declared DirecTV Now its pay-TV platform of the future, Dish has been far more opaque about where its virtual platform fits into its plans.
Still the lowest priced virtual pay-TV offering, with a base package coming in at $20 a month, Sling TV was initially branded by Dish as a complementary platform to satellite, aimed only at younger consumers who would never spring for traditional linear service.
“Our goal was … to get that generation that we've lost in pay TV,” Dish Chairman and CEO Charlie Ergen said during Dish’s third-quarter earnings call last month. “There wasn't much overlap in between Sling and Dish at all initially.”
DirecTV Now, he said, has evolved to be “a replacement for cable—really, it’s almost exactly cable, just in an OTT format.”
So, with Sling TV growing and Dish satellite TV shrinking, Sling seems to be emerging as a linear pay TV replacement, too, whether Dish wants it to or not. But that seems to be a tougher role for Sling TV to live up to than it is for DirecTV Now.
Start with the program selection. Dish ended its latest tense program licensing dance with CBS Corp. the same way it did back in 2014—without a retrans deal for the CBS Television Network. This means that in a vMPVD market that has swelled to include not only Hulu but also the forces of Google, Sling TV is the only major virtual service that lacks one of the most popular channels on television.
Access to local broadcast stations has become the most important differentiator among the half-dozen or so vMVPD services, all competing for the same segment of early adopters. Sling TV not only has low infiltration of Fox, ABC and NBC affiliates, it has no access to CBS at all, and is left advising subscribers to get over-the-air antennas.
With DirecTV about to move to a new backbone that will supply users with, among other things, a cloud DVR and 4K viewing capabilities, and rivals YouTube TV and Hulu Live steeped in long-simmering video streaming expertise, Sling TV doesn’t seem to have a technology advantage of any kind.
At least in Dish’s current configuration, analysts don’t see Sling as a replacement for linear satellite, either. Perhaps the biggest naysayer is MoffettNathanson analyst Craig Moffett, who recently calculated Sling TV’s lifetime customer value to be just $274 compared to $1,100 for Dish’s linear satellite service.
“We’ve now seen Sling TV contribute to the top and bottom lines long enough to make clear (as if anyone had any doubts anyway) that Sling TV is economically irrelevant,” Moffett said after Dish’s third-quarter earnings call. “It is doing nothing to arrest Dish Network’s slide.” — Dan | @FierceCable