February 10, 2015

Approaching Escape Velocity, Captain

Sling TV has been very busy in the past month. Not content to sit on its laurels after its well-received launch at CES, Dish’s in-house OTT startup is aggressively trying to up its game. In the past 30 days, it has announced the addition of both Univision and AMC to the core $20/month package, as well as a $5/month sports package that includes the SEC Network (college football) and Univision Deportes (first-division Mexican soccer). These are important additions to a service that has already captured the attention of the industry.

What can we learn from Sling TV’s recent moves, and what does it tell us about the future of TV? Two things.

1. Sling TV is Now on ‘Internet Time’
Innovation in the legacy pay-TV industry has never happened at lightning speed (like turning an oil tanker, it is a very slow and arduous process). DirecTV launched in 1994 and is still viewed as the new kid on the block by old-school cable guys. The Motorola set-top box powering my current Comcast service was designed during the Clinton administration. ‘TV Everywhere’ was first announced in 2009, and five years later is still viewed as a ‘new’ service. You get the idea.

Enter Sling TV, which announced a product, got feedback from the market, and are acting immediately to improve the offering. For example, many argued that there was insufficient value in the base $20 package. In response, Sling TV is adding content without raising the price (i.e., adding Univision and AMC). This is a playbook straight out of Netflix, not at all the typical behavior of MVPDs accustomed to raising prices every year for the right to receive the same content as last year.

People forget how weak the Netflix streaming library was for the first couple of years. It wasn’t only weak; it was pathetic. But that wasn’t the point. It was about finding the right price point, business model, and go-to-market package, as well as a deep-seated commitment to improve the content offer over time. That’s precisely what Netflix did, and look where they are today.

A second common reaction to Sling TV’s initial offering was that it needed more sports content, especially given the central role sports plays in a consumer’s decision to keep or forego a traditional pay-TV package. Boom, SlingTV (almost) instantly rolls out a $5 sports package to shore up that part of the value proposition, at least for those who need sports (and unlike traditional pay-TV services, those uninterested in sports are not required to help pay the freight).

Regardless of the merits of these two moves in terms of the specific channels involved, this type of speed and responsiveness is going to get the consumer’s attention if the service is marketed properly. That is, if Sling TV can persuade consumers that the service is going to continue to improve along this trajectory (even if it can’t keep up this initial pace forever), then Sling TV could be much more of a game-changer than I initially believed.

2. Price Points are Powerful
Apple’s most powerful innovation in the music industry was not the iPod. It was not even iTunes. It was the $0.99 price for a single track. This innovation completely disrupted the decades-old model of selling albums and ultimately led to the per-play pricing that Spotify and Taylor Swift are arguing about as we speak. This innovation would never have worked, however, if not for widespread consumer dissatisfaction with existing CD prices.

Similarly, Sling TV’s most important innovation to date is the $20 core bundle and its array of $5 add-ons. No, it’s not the a la carte ‘instant nirvana’ that the blogosphere endlessly chatters on about, but it is clever, practical, and potentially highly disruptive all at the same time. I’m not saying this price point is as revolutionary as the $0.99 digital music track, but most certainly Sling TV is planting in equally fertile ground with respect to consumer dissatisfaction with existing pay-TV pricing. If the $20+$5 pricing model catches on and spreads to other MVPD OTT service offerings, the effect on the industry will be much more significant than Sling TV’s short-term uptake.

Many successful innovations come out of the gate slowly. Windows 1.0 wasn’t exactly a great product, as I recall. The first iPhone didn’t even permit app downloads. Success was instead found through iteration and improving the product more quickly than incumbents could respond. Truth be told, this approach fails more often than it succeeds. But when it does work, the product (or service) reaches ‘escape velocity,’ breaks away from the competition, and becomes almost impossible to catch. Netflix did it and, for the first time, I’m genuinely asking myself whether Sling TV could be next.

Stick with TDG and stay ahead of the curve.

Joel is a Senior Advisor for TDG and serves as an advisor and Board Member to the video ecosystem and technology companies. He lives near Seattle, WA.

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