Dish banking on cloud DVR, extra packs, advanced ads to bolster ‘thin’ Sling margins

Sling TV
Sling TV hopes new features and advanced advertising will bolster margins for its Sling TV platform. (Sling TV)

Dish Network is following the playbook of satellite TV rival DirecTV, declaring that features such as cloud DVR and program add-on bundles, as well as revenue from advanced advertising, will eventually bolster the narrow margins of its increasingly important virtual pay TV platform, Sling TV.

“Obviously margins are thin and we have to constantly reevaluate not only what we're paying for programming, what programming is on the service, what programming we could have on the service to make us more competitive and pricing along with that,” Sling TV CEO Erik Carlson said during Tuesday's first quarter earnings call with investors. (A transcript of the call was provided by Seeking Alpha.)

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“One of the things that we are focused on … is really trying to monetize the experience,” Carlson added. “So, keeping our prices as low as we possibly can for obviously entry-level packaging. And that would be either our $20 orange package or our $25 blue package, but then the monetizing our customer relationships with the add-on packs that I mentioned like our extra packs. Obviously our cloud DVR service is showing growth, and then the ad sales that we have on Sling.”

Carlson noted that addressable campaigns on Sling TV during the March Madness basketball tournament resulted in a tripling in ad revenue on the platform relative to the 2017 event.

The insight is an attempt to sway investment analysts, who have been skeptical of the profitability of virtual pay TV services like Sling TV, which has a base price of only $20 a month.

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Dish said it now has just over 2.3 million Sling TV subscribers, with the virtual service now accounting for more than 17% of the operator’s total pay TV customer base. 

When Sling launched as the first vMVPD in February 2015, Dish spoke of the product as a “complement” to its core linear TV offering—a niche produce offered to cord cutters and multiscreen users unhappy with the TV Everywhere experience. 

Dish opened its Tuesday earning call declaring that it has a “mature business in Dish TV and a growth business in Sling TV.” 

During the first quarter, Sling TV added 94,000 customers, bringing year-over-year growth of the platform to 36%. Sling TV is still the biggest vMVDP, but AT&T’s DirecTV Now is growing much faster right now, having added 312,00 customers in the first quarter. 

Remarking on the high volume of skeptics on Wall Street for Sling TV and the overall vMVPD business, Dish Chairman Charlie Ergen added, “We're going to take some arrows, so be it. But we're going to do the right economic thing. And we think there's places—Sling has a tremendous technology. So we have a lot of value in that technology. We can do things that other people can't. And then second, I think we've got reasonable flexibility in our contracts to date to go maybe to places that others don't. And we could go where other places, but we're not going to go where there is just no money.”