Dish Network Corp (NASDAQ:DISH) provides one of several cable television options for customers across the United States. Some customers and investors might be surprised to learn that Dish Network also owns one of the early leaders in the cord-cutting and over-the-top television services.
Sling TV, which was launched by Dish Network in 2015, now has an estimated 760,000 subscribers. As Dish Network’s main revenue driver faces pressure in a fast-changing industry, the company is well positioned with market leader Sling TV.
Once known as a sports service, Sling TV has done a nice job of diversifying its content and offerings. Sling TV now offers channels from companies like Walt Disney Co (NYSE:DIS), AMC Networks Inc (NASDAQ:AMCX), Viacom, Inc. (NASDAQ:VIA), Twenty-First Century Fox Inc (NASDAQ:FOXA) and NBC. Sling TV has made a great cord-cutting option for customers by offering channels that appeal to men, women and kids.
The company also hasn’t shied away from adding more sports programming. Sling TV was the first OTT service to get the NHL Network, and has recently signed deals with the Pac 12 Network and Fox to include their regional sports networks.
Sling TV now offers two initial packages and lots of add-on packages. Sling Orange is priced at $20 a month and is led by channels like ESPN, ESPN2, AMC, TBS, TNT and the Disney Channel. Sling Blue is priced at $25 and includes Fox Sports 1, Fox Sports 2, NBC Sports, AMC, NFL Network, Nick Jr., and FOX and NBC On Demand programming. Sling Blue also includes regional sports networks from Fox Sports.
Both packages can be bought together for $40 a month and offer a large library of channels.
Add-on offerings include packages like Sports Extra, Kids Extra, Lifestyle Plus, New Plus, Spanish, Caribe, Sudamerica, Espana, World Cricket, Chinese and World Music. Customers are also able to add premium channels like Cinemax, Starz and HBO as extras.
Sling TV has been aggressively advertising and using special events to get its name and content in front of potential viewers. This past weekend, ads could be seen on Facebook Inc (NASDAQ:FB) advertising that Sling TV carries the AMC channel. The ads also reminded consumers that a free seven-day trial was offered, just in time for the premiere of season 7 of “The Walking Dead”.
An earlier advertising effort from Dish promoted Sling TV in September. A free preview without a credit card was offered, highlighting the first 2016 Presidential Debate and the start of the NFL season. Sling TV also offered a free Starz preview in September to all its customers, highlighted by the cable premiere of “Star Wars: The Force Awakens.”
Dish Network is putting a lot of effort into its Sling TV offering. Earlier this year, when Dish reached a multiyear agreement with Viacom, the deal came with channels being added to Sling TV as well. Large advertising campaigns also brought in Danny Trejo to target new audiences, and #TakeBackTV to target millennials.
The advertising came as a bit of a shock to some who follow DISH stock. Originally, Sling TV was not being offered as a cord-cutting option. Dish tried hard not to upset the companies it had partnered with, which rely on cable packages carrying their channels. Dish wanted to market Sling TV as an additional service for customers or target customers who do not currently have cable.
The opportunity for Sling TV and Dish here is huge. In the second quarter of 2016, a record 812,000 people stopped their cable television service. In the U.S., 21 million homes are without cable television. Of that total, 16 million homes have never had cable, and the other five million homes have made the switch from cable to a different offering.
Obviously, there are concerns about Sling TV taking away from its main business, or cannibalizing its main revenue driver. Dish Network has argued heavily against this and said on a recent earnings call, “We’ve never seen much at all migration from DISH Network over to Sling TV. Historically, it’s been a different customer base that we attract for Sling versus the satellite business.”
One of the other points made that stuck with me was the fact that Sling TV can get into many places Dish can’t. Remember that certain apartments or college campuses don’t allow people to put up dishes or select different cable providers than the one they partner with. Sling TV is a huge opportunity for Dish to gain new customers that were previously off limits.
In the second quarter, Dish Network reported revenue of $3.84 billion, a slight increase from the prior year. Dish does not break out Sling TV figures, choosing to include the customers with its overall sub base. Dish ended the quarter with 13.593 million paying subscribers, a decline from the prior year (13.932 million). The average revenue per user increased from $87.91 to $89.98. Estimates earlier this year said Sing TV had 764,000 subscribers.
The Sling TV offering from Dish Network is one of several existing or coming over-the-top offerings from companies. AT&T Inc. (NYSE:T) will enter the cord-cutting skinny bundle market with its DirecTV Now offering. AT&T’s CEO Randall Stephenson told an audience that the service would include 100 channels and come with a price point of $35 per month. This could cause some problems to Dish and its Sling TV offering, but customers will want to see what channels are included.
Sling TV won several top honors at the 2015 Consumer Electronics Show. Since that time, DISH stock has spent the time and money to make Sling a worthwhile over-the-top option for consumers.
While ultimately, cord-cutting could hurt Dish’s main business, the company is clearly focusing on the future by taking this trend head on with Sling TV. Dish stock should trade higher based on the growth of that segment.
As of this writing, Chris Katje did not hold a position in any of the aforementioned securities.
