Although Dish declined to say how many subscribers Sling has attracted so far, it’s certainly been one of the most talked-about products in streaming television, also known as over-the-top TV. Lynch joined Dish in 2009 when Charlie Ergen, the company’s chairman, hired him to create a “next-generation TV service” that would appeal to the mostly younger consumers who were either cutting the cable cord or never had cable to begin with. Back then, Lynch said, Ergen was already concerned that traditional pay television would reach a saturation point, and even begin to decline. He was right.
But building a cheaper online alternative to
traditional cable TV didn’t just involve technical hurdles, Lynch said. The status quo of bundling cable channels together in large packages has been a profitable model for more than 30 years, and old habits die hard. Cable companies, knowing they face competition from emerging Web-TV services, have entered into long-term contracts with media companies that, in many cases, place serious restrictions on how those companies may license their content to alternative services like Sling TV. In other words, it’s not that cable channels don’t necessarily want their content to be available over-the-top, it’s that their current agreements with cable companies may not allow it.
Lynch, who serves as chief executive of Sling TV LLC, a Dish subsidiary, spoke with International Business Times this week about the future of over-the-top TV and whether or not the cable bundle’s days are truly numbered.
International Business Times: You’re breaking open a business model that’s been traditionally lucrative for a lot of people -- the cable bundle -- and you’re coming out with this skinnier package that’s different from anything we’ve seen before. What’s been the response from programmers on this? When you were pitching it, was there resistance?
Roger Lynch: As you might expect, that response has changed a lot over time. Charlie and I first started meeting with programmers four years ago on this. At the time, they thought it was interesting, but I think they were a little skeptical. Also they realized that, in many cases, they didn’t even have the underlying rights to grant us to do this.
IBTimes: There are existing contracts in some cases -- Comcast and Disney have an existing agreement that expires in 2022. And some of these contracts are said to have different clauses in them that might prohibit programmers from doing this kind of thing.
Lynch: There are, certainly. I think this came up as part of the review of the [failed] Comcast-Time Warner merger. There are contracts that cable companies have imposed upon programmers that restrict programmers’ ability to license content to over-the-top services, and to me that’s a very anti-competitive thing for them to be able to do.
IBTimes: So how do you get around that with a product like Sling?
Lynch: We have worked with programmers who have had the ability to license their content to us, where we could create the conditions so they could comply with their other programming agreements. But it’s been an inhibitor, and there are some programmers, frankly, who aren’t on Sling for specifically that reason.
IBTimes: Speaking of programmers, you do have one big one, obviously, and that’s ESPN. I think that’s one of the reasons why Sling got so much attention, because it was like, “Wow, they got ESPN.” How did you convince ESPN that this is something they should do, and how important is ESPN for Sling?
Lynch: It’s very important for us. It’s really one of our flagship channels. I think when we were negotiating the renewal of our satellite deal with them, we started to realize that they had similar concerns to what we had -- that pay TV should be growing right now as a function of new household formation, and it’s not. It’s actually declining slightly. And that’s because there are a lot of people cutting the cord, and millennials are going out and getting their first apartment and they don’t get traditional pay TV.
IBTimes: And they may never.
Lynch: Right, well, not only because of having to pay for it -- because it is quite expensive -- but because of all the pain points of that model compared to how they subscribe to other services like music or Netflix or things like that. This is traditional pay TV where you start with a credit check, and sign a two-year contract, and you have an installer, and it only plays in your home, and all the things that are so antithetical to how they consume other content.
IBTimes: You mentioned how pay TV has been declining. Dish lost a lot of video subscribers in the last quarter. Part of that, I think, was because of the dispute with 21st Century Fox, but is there a point where you see Dish and Sling competing for the same customers?
Lynch: I don’t think we do today very much at all. How things play out in the future, that could change. But today, the customer we’re going after is a pretty different customer than the one Dish goes after.
IBTimes: Are there subscriber caps on Sling? Can you grow beyond a certain amount?
Lynch: There’s nothing that prevents us from continuing to grow our business.
IBTimes: But under the current agreements, would you be able to grow? I saw a number -- I don’t know if it was an estimate -- but someone said that 2 million subscribers was as high as you could go. Is that accurate?
Lynch: I’m not going to comment on our specific programming agreements. Our programmers -- and I spend a lot of time with them -- they’re not talking to us about curtailing our growth. They’re talking to us about, "How do we grow faster?"
IBTimes: How has the product been received? Have you been getting feedback from your customers?
Lynch: Sure. We’ve been quite encouraged by what we’re seeing.
IBTimes: Could we be heading into a future where all of our content is over broadband and over-the-top?
Lynch: My personal view is that we’re at the very beginning of that transition, and someday that’s how all TV will be consumed, but it’s hard to predict how long that transition will take ... There will be certain customers for whom the traditional pay-TV bundle is going to provide the best value for a long time.
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