Dish Network Corp (NASDAQ:DISH) is launching it’s much-anticipated Dish Sling TV service on Tuesday. The unprecedented internet TV service consists of a smattering of highly desired channels, representing the increasing shift to streaming TV and a-la-carte programming.
While I view this as an incredibly forward-thinking move by DISH and believe it should be a boon to its stock, Netflix, Inc. (NASDAQ:NFLX) stock is the less obvious beneficiary.
What is DISH Sling TV?
Dish Sling TV is a subscription TV service, which, while offering a more limited lineup than traditional starter cable packages, costs a mere $20 per month and features some mainstream, compelling offerings. None of them appear to directly affect NFLX stock, but after looking a little deeper into the service, NFLX could actually benefit more than DISH stock itself.
To understand why, you first have to understand what DISH Sling TV is in and of itself.
InvestorPlace‘s Jonathan Berr explains:
Called Sling TV, the Internet-based TV service is aimed squarely at millennials who increasingly are quitting pay TV (if they ever even signed up for it). For $20 per month, subscribers get access to variety of popular channels including Adult Swim, along with Scripps Networks Interactive, Inc.’s (NYSE:SNI) Food Network and HGTV, as well as Time Warner Inc’s (NYSE:TWX) TNT, TBS and CNN. But the real coup for Dish Network is ESPN.
At first glance, Walt Disney Co (NYSE:DIS) and its wildly popular ESPN sports network look like the obvious beneficiaries of the Dish Sling TV offering, but NFLX stock — which actually is not directly related to Dish’s new service in any way — is the single most-important investment takeaway from this new offering.
Why DISH Sling TV Will Boost NFLX Stock
The era of cord-cutting has been upon us for years, and with a slimmed-down, cheaper version of cable now available, the consumer will be much more willing and able to mix-and-match services like Netflix, Hulu, and the Prime service of Amazon.com, Inc. (NASDAQ:AMZN).
The $20 monthly Sling TV service — which includes ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Cartoon Network and Disney Channel — is far cheaper than most starter TV packs, and doesn’t bog customers down with the dozens of garbage channels that plague most cable bundles.
That packaging encourages customers to use that cost savings to supplement their Sling TV service with more cheap monthly programming options, which still easily undercut typical cable packages if grouped with Dish’s new offering. Heck, Roger Lynch, CEO of Sling TV, has as much directly, calling Sling TV “perfectly complementary to services like Netflix and Hulu.”
Dishing out $8 and $9 apiece monthly for NFLX and Hulu still allows consumers to pay less than traditional cable TV bundles. While consumers could spend the $17 on both, if they have to choose between the two, which one will it be? How can the individual investor possibly know?
Thankfully, history has taught us a valuable lesson. The number of Netflix subscribers is dramatically higher than Hulu’s; in fact, at 57 million worldwide, the subscriber base of NFLX vastly outnumbers Hulu’s 6 million subscribers.
Bottom Line: NFLX Stock is a Buy
Dish’s Sling TV has gotten a good amount of press already, and I expect it to get much more as it rolls out. From the Amazon Fire stick to the Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) Nexus Player to Microsoft Corporation (NASDAQ:MSFT) and its Xbox One, Sling will be available on plenty of major platforms. But the little-remembered fact-of-the-day is this: NFLX stock becomes more and more of a screaming buy with every subscriber to Sling TV.
And with TV starter packages from Comcast Corporation (NASDAQ:CMCSA) beginning at about $50 per month, I expect Sling TV to gain a meaningful following.
As of this writing John Divine owned shares of GOOG stock and GOOGL stock. You can follow him on Twitter at @divinebizkid.
