Dish CEO Says Online TV a 'License to Lose Money'

1 May, 2017 By: Erik Gruenwedel

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The push by pay-TV operators to roll out budget-priced online TV services appears to be a scramble to lose money, according to Dish Network founder and CEO Charlie Ergen.

Dish was the first pay-TV operator to launch a standalone online service with Sling TV. The satellite operator contends Sling is different from competitors such as DirecTV Now, PlayStation Vue, YouTube TV, Charter Spectrum TV Plus and Hulu’s pending live streaming service — by not replicating linear TV on the Web.

Speaking May 1 on his company's fiscal call, Ergen believes the current pay-TV strategy is to convert existing linear subs into money-losing over-the-top video subs.

“We were not looking to take a cable subscriber, or for that matter, a satellite subscriber and suddenly convert them into an OTT [sub] because that [adds] SAC [subscriber acquisition costs] to get the same customer,” Ergen said.

Dish doesn’t release Sling TV subscriber numbers, but some analysts believe the service has almost two million subs — many transitioning from linear satellite service.

Indeed, Dish said it lost 346,000 pay-TV subscribers in the first quarter, ended March 31. It ended the period with 13.52 million video subs compared to 13.87 million subs in the previous-year period.

“My belief is that OTT video will take share away from pay-TV. So satellite and cable will be smaller five years from now than they are today. You're already seeing that reduction [in satellite] … and phone companies, you've seen reductions really for the last couple of years,” Ergen said.

Roger Lynch, CEO of Sling TV, said competitors such as DirecTV Now offer bigger channel bundles, which he said underscores Sling’s strategy of enabling subs to customized premium and extra channels on top of the standard 20-channel bundle.

As a result, ESPN is an option channel at Sling, unlike other online services, which include the pricey sports network. Lynch says internal data suggests ESPN is not a popular year-round channel. He and Ergen contend the jury is out on what constitutes an appropriate OTT video channel bundle.

“It may be a different class of customers coming into the market spurred by the big bundles that have launched in OTT. But we're definitely seeing customers who are taking more add-on packs that is certainly correlated with that,” Lynch said.
 

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