OTT Vs. Traditional Pay TV: Digital No Longer A Supplement

Traditional TV network executives may need to adjust the belief that OTT -- digital services selling TV networks to consumers -- is just an “option” for TV consumers, or a “supplement” for their business.

Conditions have changed. One major pay TV distribution senior executive, Charles Ergen, who is chief executive officer of Dish Network, thinks the tide has shifted -- dramatically. He said, during a financial earnings phone call, that OTT now looks to “replace” traditional pay TV services -- cable, satellite or telco.

How close is Dish Network’s Sling TV to that? Ergen isn’t saying. Still many feel Dish’s latest quarterly earning phone call -- which reveal that the company pulled in overall net 28,000 subscriber gain -- says something.

Dish -- both its traditional pay TV satellite service and Sling TV -- tallied that gain. Drilling down, analysts may suggest Sling TV got the biggest part of this upside -- and more. The traditional Dish Network has been losing subscribers — lots of them.



Estimates are Sling TV has more than 1 million subscribers now. Overall, the company says it now has 13.7 million pay TV subscribers -- from both its satellite pay TV business and its OTT pay TV business.

For TV Watch, this seems like a far cry from “replacement” -- but perhaps Ergen is looking at other options.

It isn’t just pricing -- Sling TV as low as $20 a month and AT&T’s DirecTV Now is in the $35 range, much less than the traditional pay TV packages priced at $100 or more. 

In the earnings call, Ergen brought up “advertising,” something young OTT subscribers also eye carefully. He said of TV networks: “If they continue to raise prices, [and] continue to have 16 to 18 minutes of advertising per hour… then the acceleration will increase.”

While “replacement” isn’t here at the moment -- in terms of substantial OTT subscribers dropping traditional pay TV services -- he believes the industry needs to act now, and programmers need to adapt quickly.

For their part, traditional TV networks and their associated production companies, continue to believe this is “premium content” — the core of their future financial power.

But adapt, how? Offer less TV advertising as a part of new financial model for those shows?  Who will pay for it? Can young millennials get subsidies -- like with Obamacare?

Wayne Friedman is on vacation. This column ran February 23.

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