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DISH’s Sling TV Sees Over-the-Top Success

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Sling TV

On February 18, 2016, The Wall Street Journal reported that DISH Network’s (DISH) Sling TV had 600,000 subscribers. DISH announced its fiscal 4Q15 and 2015 earnings on February 18, 2016. The company does not disclose its Sling TV subscribers separately but includes it in its pay-TV subscriber numbers. It had 13.9 million pay-TV subscribers as on December 31, 2015. The same report has also cited Sling TV subscriber numbers from MoffettNathanson and Evercore ISI at 523,000 and 400,000, respectively.

Dish stated at the company’s 4Q15 and fiscal 2015 earnings call that majority of Sling TV subscribers are either “cord-cutters” or “cord-nevers”—Millennials, or people in the 18–34 age group, who have cut the cord on pay-TV or have never subscribed to pay-TV.

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However, the increase in Sling TV subscribers also had an adverse effect on DISH’s pay-TV ARPU (average revenue per user). This is because Sling TV subscribers pay $20 per month for a “skinny” bundle of channels, compared to traditional pay-TV subscribers, who pay in the range of $100–$150 per month. Dish had a pay-TV ARPU of $86.79 in 2015—a 3.6% increase over 2014.

As the above chart indicates, Dish’s Sling TV is still priced at the higher end of the OTT (over-the-top) market compared to Hulu’s ad-supported service, which is priced at $8 per month, Netflix’s (NFLX) plans, which are priced at an average of $10 per month, and Time Warner’s (TWX) HBO Now, which is priced at $15 per month. The chart above shows the same. DISH Network makes up 0.21% of the PowerShares QQQ Trust Series 1 ETF (QQQ). QQQ also has 4.9% exposure to the Television space.

FCC’s set-top box proposal

DISH stated on its 4Q15 and 2015 earnings call that, considering the success of its Sling TV and the increasing use of multiple devices by consumers for watching videos including Roku and Apple (AAPL) TV, it is “not clear” that the FCC’s (Federal Communications Commission) new set-top box proposal “is needed to encourage innovation,” adding that “it would actually hinder it.”

Late last month, the FCC put forward a proposal that would give a choice to pay-TV consumers of whether to use the set-top box or cable app provided by their cable provider, or to go for set-top boxes offered by third-party providers. The FCC approved this proposal on February 18, 2016, by three votes to two.

Now let’s look at what Wall Street thinks of DISH’s earnings in 2015.

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