Analysts, Comcast Exec: Dish's Sling Service Won't Upend Pay TV

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Comcast Cable Communications CEO Neil Smit

"We don't think Dish's new service will take the world by storm," but its pricing is "genuinely disruptive," says one Wall Street observer

A day after pay TV giant Dish unveiled its $20-per-month streaming video service Sling TV at CES, a couple of Wall Street analysts and Comcast Cable Communications CEO Neil Smit on Tuesday argued that it would attract a niche audience rather than kill pay TV.

Speaking at the Citi 2015 Global Internet, Media & Telecommunications Conference in Las Vegas, Smit argued that Comcast could offer consumers similar services for less money.

"Reading about Sling TV, I was comparing it to what an equivalent offer would be for us," he said. "We offer a performance-based broadband product along with a digital television selection, which includes ESPN and all the broadcast networks, for a ... price of about $80. If you were to compare that to the $20 of the Dish [over-the-top service] plus our ... pricing of performance broadband at about $67, we are actually a lower-priced offer all-in, offering broadcast, multiple streams, a fundamentally, I think, better product if you include the broadband you are going to need to [get] the service."

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Smit said that while many people will continue to enjoy traditional pay TV bundles, others will go for new offers, meaning that pay TV and content companies would continue to engage in "more experimentation" to target millennials and financially conscious consumers. For example, he said that the "Internet Plus" service that Comcast had launched in 2013, which includes broadband, basic cable and HBO, for about $40-$50 per month depending on location, has done well for the company.

Nomura analyst Anthony DiClemente in a report Tuesday also concluded: "This Sling Won't Bring Down a Goliath."

"We believe cable TV distributors continue to make the double-play bundle economically attractive as a way to retain consumers," he wrote. "We estimate moving from a double-play to a broadband-only package would save about $30-$50 per month at current promotional rates. Adding in the desired OTT services, such as Sling TV, Netflix and/or Hulu [Plus], quickly erodes that savings."

Plus, said DiClemente: "The combined offering also lacks important features, such as live TV Everywhere, DVR, it may require additional equipment to be used on a TV, and it is limited to a certain number of simultaneous streams."

Wunderlich Securities analyst Matthew Harrigan cited similar issues. "The service obviously requires a strong high-speed data connection for good quality of service," he wrote in a report. "We regard the ability to stream just one video channel as a major limiting element."

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DiClemente calculated that a pay TV and broadband subscriber pays $100-$120 per month, or as little as $89 when able to take advantage of promotional rates. Cord cutters may pay $40-$60 per month for broadband. Add in Sling for $20, Netflix for $7.99, Hulu Plus for $7.99 and an estimated $10-$20 per month for a la carte film and TV content from the likes of iTunes, Amazon and Google and digital TV antennas for $35-$40 per TV, and you get to $86-$116 per month. Concluded DiClemente: "Savings don't justify the benefits."

MoffettNathanson analyst Craig Moffett also said in a report that "we don’t think Dish’s new service will take the world by storm." But he argued that "this product will find a niche and that its pricing will be genuinely disruptive," plus it "takes a meaningful step towards a la carte, at least of a sort."

He explained: "Consumers now have the ability to craft their own bundle that might, just might, be "good enough." Combining a basic entry broadband and broadcast only package with a Netflix subscription or a password-shared HBO Go service may give consumers enough content at a reasonable price to render the bigger [pay TV] bundles unattractive."

Email: Georg.Szalai@THR.com
Twitter: @georgszalai

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