Sling TV versus DIRECTV Now
Dish Network (DISH) is facing increasing competition from AT&T’s (T) recently launched DIRECTV Now. DIRECTV Now, AT&T’s over-the-top (or OTT) video streaming service, launched in November 2016 and features over 100 channels. AT&T penetrated this market, which includes Verizon’s (VZ) OTT offering, go90.
Dish talked about AT&T’s DIRECTV Now at the company’s fiscal 3Q16 earnings call. Dish stated that it views the DIRECTV Now service as a “bigger bundle” targeted toward traditional pay-TV subscribers. In contrast, Dish’s Sling TV is more of a skinny bundle that gives more flexibility to its subscribers.
Earlier this year, Dish Network unveiled two packages for Sling TV: Sling Orange and Sling Blue. Sling Orange is a basic single-screen package priced at $20, and Sling Blue is a multi-screen package priced at $25 per month. Sling TV subscribers can buy both Sling Orange and Blue for $40 per month.
The revamped version of Dish’s Sling TV service has given Millennials an option besides SVOD (subscription video on demand) services such as Netflix (NFLX). According to a Digitalsmith 2Q16 video trends report and as the chart above shows, Netflix leads the OTT market with a 54% share, followed by Amazon (AMZN) with 24%.
OTT could be the engine for high EBITDA
Dish Network’s chairman, Charles William Ergen, stated in an earlier earnings call that “OTT has a bright future” and if successful, could very well propel the company to be a “high-growth EBITDA” company. He added that the company views the OTT trend as a “growth opportunity” and it could “grow EBITDA in the linear business, but it would come at the expense of cash flow, so given those choices, we would tend to go more towards cash flow.”