Here's Why Sony's Streaming TV Service Is Destined To Fail

By Markets Fool.com

Sony has launched a digital television service which offers more channels thanDISH Network's (NASDAQ: DISH)Sling.

Continue Reading Below

Dubbed PlayStation Vue, the streaming service has 85 channels in its base package and expanded offerings at higher price points which include regional sports offerings. Vue brings Sony squarely into the battle to win over cord cutters, but the company has chosen an odd strategy in its attempt to appeal to people looking to save money by getting rid of traditional cable.

Playstation Vue costs $49.99 a month for its entry level "Access" package -- a fairly similar offering to expanded basic cable, albeit with some holes. For $59.99 you can upgrade to "Core," which adds "local regional sports networks such as YES Network inNew York, Comcast SportsNet Chicago, and Comcast SportsNet Philadelphia, as well as additional sports and movie networks," the company claimed via press release.And, if you truly want everything, there's a $69.99 "Elite" packages which adds "more than 25 lifestyle, music and family channels" to the contents of the other two packages.

"The TV experience needs a revolution and PlayStation Vue changes the rules by embracing how today's viewers want to discover and enjoy content," saidAndrew House, President and Global CEO of Sony Computer Entertainment "PlayStation Vue modernizes the TV viewing experience, taking the best of live TV and on-demand content and bringing it to the PlayStation ecosystem in a way that gives control back to viewers and enables them to spend more time watching their favorite programs and less time channel surfing using outdated menus."

That all sounds nice, but in reality PlayStation Vue is a streaming version of traditional cable. It's an alternative toComcast,Time Warner Cable,DirecTV and the rest of the big players, but it's not a value play like Sling.

Breaking down the economics
It's hard to see who exactly Sony is hoping to market Playstation Vue to as it's not a major savings over what most people pay for cable. In fact, on a per channel basis, PS Vue costs a little more than most traditional wired options.

Continue Reading Below

The most recent Federal Communications Commission annual studyof prices shows that the average American paid $64.41 a month for expanded basic cable -- the most popular tier of service. If you assume prices would have increased by 5% a year since the 2013 survey, that would leave you with a cost of $71.01 in January 2015.

That's higher than the $49.99 a month Sony is charging, but the average expanded basic cable offering includes 160 channels, according to the FCC report. That gives cable a price of roughly $0.48 per channel while PS Vue's cost nearly $0.59 each.

Sony still comes out way ahead of Sling which has a per-channel cost of nearly $1, but it's hard to see why customers would pick a digital service which is priced similarly to cable. It should also be noted that traditional basic cable, which the FCC report said offers 54 channels on average, cost only $22.63 a month at the time of the survey ($25.42 in 2015 if you assume a 6% yearly price increase).

Source: FCC

Sony does have some advantages
Essentially Sony has delivered a cable-like service that does not require a traditional cable subscription. The company touts that its prices are all-inclusive and that's a fair argument since traditional cable has been tacking on ticky tack fees for sports programming, broadcast networks, and, in most cases, equipment rental.

The Sony service promises to be all inclusive. At launch it requires a PlayStation 3 or 4, but the company has promised that it will be available on Apple iPad and "other popular devices in the near future.'

Who is this for?
Sony has replicated cable at a similar price in a digital, streaming setup. That's admirable and it gives customers another potential choice, but it's hard to see who the company's target market is. Cord cutters are unlikely to want to replace their cable bill with a service that's almost as expensive as a traditional wired connection.

Aside from people who live in markets which are not well-served by cable or satellite, it's hard to see who PS Vue will appeal to.

Sony has accomplished something in lining up an impressive array of content for a service which breaks wired cable's monopoly in many markets. That's a triumph, of a sense, but it's one that's more or less meaningless because the cost is so high.

PlayStation Vue is an accomplishment, but it's one destined for failure as the audience for a $49.99 a month cord cutting option is not likely to be a large one.

The article Here's Why Sony's Streaming TV Service Is Destined To Fail originally appeared on Fool.com.

Daniel Kline owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.