Sling TV Suppliers Say The Company Has Less Than 500,000 Subscribers, Decelerating Signups

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About: DISH Network Corporation (DISH)
by: Dan Rayburn
Summary

Third-party vendors I have spoken to told me the company had less than 500,000 paying subscribers for Sling TV at the end of October.

DISH needs to set better expectations in the market of the potential for Sling TV and back it up with realistic numbers and user data.

Otherwise, they take a big chance that they set themselves up for failure due to unrealistic expectations set by the industry and those on Wall Street.

In a regulatory filing in August of this year, DISH Network (NASDAQ:DISH) said they had 169,000 subs as of the end of March for their Sling TV live streaming service. Since then, the company has refused to say how many paid subscribers they have, their churn rate or detail any user trends around their live streaming offering. We don't know who the average user is, how long they watch or any other key demographic details around live video consumption on the Sling TV platform.

In order to operate, Sling TV relies on a host of third-party vendors and some of those companies I have spoken to, who know what Sling TV's traffic looks like, told me the company had less than 500,000 paying subscribers at the end of October. This number would align with some of the estimates that analysts have put out in the market, pegging Sling TV's subscriber count at around 400,000. Another detail I've been told about Sling TV is that the service has seen decelerating signups since they launched in the market. There was a rush of sign ups when the service first came out, but now, the growth hasn't been that impressive. Of course, DISH won't comment on any of this, and in interviews with the media Sling TV's CEO says they are "happy" and "pleased" with their growth, but that's what we would expect them to say.

In an interview with Sling TV's CEO, published yesterday, the CEO says that "sports is an area that's a strong suit for us," except that for most sports fans, it isn't. ESPN broadcasts more shows than actual live sports. In the NYC area, games from the Mets, Yankees, Rangers, Knicks, Jets, Giants, etc., are all on channels Sling TV doesn't have (MSG, SNY, FOX, CBS). And while Sling TV likes to call out how they have March Madness and how big of a deal that is, March Madness only lasts for one month out of the year and in 2015 22 of the games were broadcast online for free. Sling TV won't say how many people sign up for their service, just for the month of March and then cancel. But that's the kind of stat we need to know to see if people are using Sling TV as a one-off for something like March Madness or sticking around once the tournament is over.

Due to content owners' requirements, Sling TV isn't allowed to let customers stream more than one channel at a time. So for households with multiple people or families, Sling TV isn't really a viable option. Sling TV likes to refer to their service à la carte, but the fact is it's not. I can't sign up to Sling TV and only pick the channels I want. Adding packages of channels grouped together isn't à la carte at all. If there is one thing that companies in the OTT space should have realized by now it's that you have to set proper expectations in the market. You can't say you are going to replace or disrupt a service like cable TV when the reality is your service lacks so much in the way of content, quality and functionality. But this is exactly what Sling TV is doing when they imply that their service can match what you get from your cable company for live TV. And it's a very confusing message since at the same time they say that many of their subscribers are people who have never signed up for cable.

Then there is the comment that Sling TV's CEO made when asked about the number of complaints around Sling TV's video quality. He said that "streaming live TV over the internet at the scale that we're doing it is relatively new." That couldn't be further from the truth. There is nothing "new" about it. Sling TV doesn't have many subscribers so their scale isn't large at all, especially since they are relying on third-party CDNs to deliver their content. Compared to other live streaming services on the Internet, like Twitch, that streams live to more than a million simultaneous users 24 hours a day, Sling TV is very small.

Sling TV's CEO has said that data caps that Comcast (NASDAQ:CMCSA) (CMCSK) is "trialing" which are capped at 300GB per month "just happen to be at a level at or below what someone would use if they're watching TV on the internet." Again, not the case. The average non-mobile Sling TV stream is delivered at about 3Mbps. On mobile, it's just over 1Mbps. If the average person watched five hours a day of Sling TV video on a large screen, and two hours a day on mobile, they would transfer a total of 230GB a month. Well below Comcast's 300GB cap, which should be noted is something Comcast is only trialing. And I will guarantee you that the average Sling TV user is not watching seven hours of video a day, 30 days a month. The numbers don't add up.

Sling TV is a niche offering, targeting a very small segment of the population, with a limited amount of content. And the moment you start adding multiple channel packages on top of Sling TV's base offering, it loses the one advantage associated with Sling TV - the price. Adding in their sports, kids and HBO packages brings Sling TV's price to $45 a month. My triple play bundle with Verizon is $110 a month, and of that, $50 of it is for cable. So I'm getting a lot more value from cable, for $5 more a month, at better quality, on more than one device at a time.

I'm not knocking Sling TV's service for what it does well. It offers a very limited amount of content, on a lot of devices, for a modest price. For some, it is perfect at what it does and I think the more options consumers have the market the better it is for competition. But comparing Sling TV to cable TV isn't accurate. It's not the same service, at the same quality, and if Sling TV is saying they have scaling problems with at most 200,000 streams at the same time it's only more evidence that services like Sling TV won't make any sizable dent in the cable TV business. Remember Aereo? That was supposed to kill off cable TV, and they had just under 88,000 paying subscribers before they closed down. DISH needs to set better expectations in the market of the potential for Sling TV and back it up with realistic numbers and user data. Otherwise, they take a big chance that they set themselves up for failure due to unrealistic expectations set by the industry and those on Wall Street.

Disclosure: None.