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Source: Dish Network.
For those following the subscription TV space closely, you may have noticed the growing new trend of cord cutting -- people going without subscription TV. Led by services like Netflix and Amazon Prime Instant Video, more would-be pay-TV consumers are opting for streaming only. Last year, an Experian Marketing survey found 6.5% of U.S. homes are cord cutters, up from 4.5% in 2010.
For pay-TV providers, this presents an obvious challenge, but also an opportunity. It isn't as if these people aren't watching television at all; it's just that many consider subscription TV's value worth less than its cost. So there's a market for a slimmed-down package of live channels delivered via a streaming-only format, and Dish Network's new Sling TV offers 11 channels-- including Disney's ESPN -- for a low monthly payment of $20.
When announcing the service, Dish CEO Joseph Clayton stuck to a familiar script:
Sling TV provides a viable alternative for live television to the millennial audience. This service gives millions of consumers a new consideration for pay TV. Sling TV fills a void for an underserved audience.
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Up until now, the focus of channels and pay-TV providers looking to offer streaming solutions has been millennials. But if Sling TV's programming is any indication, the service could attract more than just 20-somethings.
Guess Millennial means AARP-qualified
However, if the focus is millennials, it appears the head of programming didn't get the memo. Led by millennial "favorites" like CNN (average viewer age 59.1), HGTV (56.4), and TNT (53.6), it appears programming doesn't match the target demographic. As a matter of fact, the median age of programming for the 11 offered channels is 48 years old -- two years away from an AARP membership.
Instead, I think the talk about millennials is simply a ruse to compete for future cord cutters without raising investor and partner suspicion. Overall, the industry is trying to grapple with an unsustainable business model that has experienced price increases more than double annual inflation during the last two decades. At some point, subscribers will opt to forego the current business model of large, expensive packages, and request another option.
That doesn't mean the industry wants to give consumers that option
The problem is the overall industry benefits from the status quo. Although cord cutting is increasing, it is still a small portion of the overall market. Right now, both channels and providers benefit from large, bloated packages and pay-TV bills. Channels are allowed to push through content cost increases, and providers have a larger base on which to attach their profit margin. This is a win-win for the industry at the expense of consumers.
For those who think Dish's Sling TV is the beginning of the end of pay-TV as it currently is, think again. Earlier, Time Warner chairman and CEO Jeff Bewkes gave us insight into the sausage making between providers and channels when he revealed that Dish's Sling TV programming deals capped the service between 2 million to 5 million subscribers. In addition, Macquarie Capital analyst Amy Yong confirmed the total-subscriber cap at the high-end of Mr. Bewkes estimate -- although she mentioned the cap only limits marketing -- and also mentioned the service was "likely watered down from its original conception."
It seems like Dish's Sling TV will not be the game changer that cord cutters envision due to the lack of channel choice and programmer buy-in. However, look for channels and pay-TV providers to continue to offer streaming-based services "for the millennials." At some point, however, these products will become good enough to kill the proverbial Golden Goose of large and expensive pay-TV packages; but that moment is not quite here... yet.
The article Dish Networks Sling TV Programming Proves Cord Cutting Is Not Just for Millennials originally appeared on Fool.com.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Netflix, and Walt Disney. The Motley Fool owns shares of Amazon.com, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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