Televised sports are the biggest reason cable and satellite customers don’t cancel their subscriptions for online alternatives, surveys show. That gives cable and satellite companies little incentive to stream games online.
But Dish Network is betting its future on a stand-alone streaming service that includes the most popular TV sports network, ESPN, and a dozen other top channels for just $20 a month, with no cable or satellite subscription required.
It’s a move that could change the pay TV industry.
Sling TV, which Dish Network unveiled Monday, is the satellite TV provider’s answer to the growing trend of cord-cutting, in which viewers drop their traditional plans for online-only alternatives like YouTube or Netflix.
Sling TV says it will launch in the first quarter with a basic “Best of Live TV” package that includes the Disney Channel, Food Network, CNN, ABC Family, HGTV, Travel Channel, TNT, CNN, TBS, Cartoon Network and Adult Swim. The service will also include a best-of-Internet video channel from Maker Studios and some video-on-demand programs.
But its key offerings are ESPN and its sister network, ESPN2.
Surveys show the biggest single reason Dish subscribers didn’t leave was “worry about missing ESPN,” said Roger Lynch, Sling TV’s newly appointed CEO.
The company realizes it must adapt to the changing habits of customers because existing satellite revenues could disappear in the long term, Lynch said.
“We believe with this strategy, we’re not replicating traditional pay TV,” Lynch said during a Sling TV preview for The Chronicle. “We don’t want to enter a declining market. We want to enter a growth market.”
Dish Networks, which has 14 million subscribers, announced Sling TV at the 2015 International CES, a consumer electronics convention this week in Las Vegas.
Approaching ‘a la carte’ TV
Sling TV comes close to the “a la carte” selection of programs that consumer advocates want pay TV companies to adopt. Instead of forcing customers to pay for many channels they don’t watch, they want the option to pay only for their favorites.
Sling TV is “extremely innovative,” especially for the slow-moving pay TV industry, said Jimmy Schaeffler, chairman of consulting firm Carmel Group.
“Most traditional pay TV providers are still acting very much like they’re back in the ’80s or ’90s,” Schaeffler said. “They’re not responding to change. The problem with them is they’re fighting a technology that’s incredibly choice-based, and that’s the Internet.”
Sling TV costs far less than the average $90 per month that cable and satellite subscribers pay nationwide, including taxes, franchise fees, equipment rental charges and other costs. It won’t require a long-term contract or rental equipment, though customers must pay a service provider for high-speed Internet access.
Dish is targeting viewers ages 18 to 25.
“This segment loves TV; they just hate the pay TV model and they can’t afford the price,” said chief marketing officer Glenn Eisen.
If done right, it could reach an audience wider than just the estimated 25 million U.S. households that don’t subscribe to pay TV, said Schaeffler.
But given more choice online, the cord-cutting that’s affecting the entire TV industry could accelerate, undercutting Dish’s main satellite business, he said. Current subscribers now pay a minimum $45 per month for a tier that includes ESPN.
“They have to be very careful about how they pitch it and how they market it,” Schaeffler said. “They’re walking a very thin line.”
Sling TV plans to offer other packages that include channels grouped by genres, including children’s, news and sports networks, for an additional $5 per month each.
But it’s sports that would separate Sling TV from existing online competitors like Netflix.
ESPN and other sports networks are already available online, but they require a pay TV subscription. (The Hearst Corp., which publishes The Chronicle, owns 20 percent of ESPN; Disney owns the rest.)
Sports are selling point
Individual sports leagues, like the NFL and Major League Baseball, offer their own subscription packages that provide live game coverage online and through a pay TV service. And CBS-TV is examining whether to offer some of its NFL games on the network’s new online-only subscription service.
But Sling TV is the first to offer live sports and other networks for a cheap price. The combination could be enough to persuade more subscribers to dump their existing pay TV service, said Chris Young, an analyst with SNL Kagan, a media and communications research firm.
“They’re targeting a different market, but there definitely will be some existing customers who will give it a try,” Young said. “Most people are looking for answers to combat the rising costs they’ve seen on their bills.”
Still, analyst Colin Dixon said in a research note that Sling TV “misses the mark” with Millennials because the service doesn’t include MTV or Comedy Central, which are the most popular networks with younger viewers. And he noted that ESPN broadcasts only one NFL game a week.
“Dish will have to sharpen the content selection if it is to find success with the young,” said Dixon, founder of nScreenMedia, an video industry research firm.
Last year, Dish Network, the satellite TV arm of Colorado’s EchoStar Corp., negotiated a new retransmission deal with Disney that included online streaming rights to ESPN and its stable of sports channels, which include ESPN2, the SEC Network and ESPNews.
And while Dish and CBS publicly bickered over negotiations for higher retransmission fees for the network’s broadcast stations, behind-the-scenes talks also included online streaming rights for what the industry calls over-the-top services like Sling TV.
“Those were some of the most critical parts of those negotiations because they’ve never done them before,” Lynch said.
Just before the holidays, Dish and NBCUniversal hammered out an agreement that keeps five regional sports networks — including Comcast SportsNet Bay Area and Comcast SportsNet California — on the satellite service. Dish is not saying whether Sling TV will include those regional sports networks, which carry live telecasts of Northern California pro baseball, basketball and hockey games.
Dish will operate Sling TV as a separate unit by expanding Dish World, an online-only service with 300 channels and 29 languages aimed at Southeast Asia and the Middle East. Launched in April 2013, Dish World quietly became the test run for Sling TV. (Despite sharing a similar name, Sling TV will operate independently from the EchoStar-owned Sling Media, the Foster City company that makes the Slingbox remote online TV viewing device.)
‘Next phase of growth’
Lynch said EchoStar founder and chairman Charles Ergan hired him five years ago knowing that existing forms of pay TV were “going to go into decline.”
“He wanted to develop the next-generation television service that would be the next phase of growth for the business,” said Lynch. “If you look far enough into the future, this will be the way that people consume content.”
Sling TV will support laptop and desktop computers and Apple and Android mobile devices. At launch, the service will also support numerous streaming media devices that plug into TV monitors, including Roku products, Google Nexus Player and the Amazon Fire TV stick. Microsoft will offer owners of its Xbox One game console a one-month free trial of Sling TV.
“It’s on the devices you own,” Lynch said. “It’s in the home, it’s out of the home.”
One drawback is that Sling TV doesn’t offer local broadcast TV signals, he said. But an old-fashioned solution — a TV antenna — could solve that problem.
Benny Evangelista is a San Francisco Chronicle staff writer. E-mail: bevangelista@sfchronicle.com Twitter: @ChronicleBenny