For many TV viewers, the only reason to keep paying for expensive cable subscriptions is to watch sports. And for that, they invariably need ESPN, the powerful network that has exclusive rights to many of the country’s most popular football and basketball games.
For $20 a month, viewers will also be able to watch CNN, the Food Network and the Cartoon Network through a new streaming service, called Sling TV. Dish Network, which is launching Sling, said the service will debut sometime later this month.
With Monday’s announcement, 2015 is shaping up to be the year when consumers have more reasons than ever to abandon the expensive bundles of cable channels offered by companies like Comcast and Verizon.
HBO and Showtime are planning to roll out their own digital streaming services early this year. Sony Entertainment Network will also offer online viewing of channels like Viacom’s MTV, Nickelodeon and Comedy Central. Millions are already used to paying for Netflix and Hulu Plus for their television viewing.
But ESPN’s entry into online streaming is different. The tremendous demand for ESPN is unparalleled in the cable TV world. The top ten most-viewed programs in cable television history are all ESPN programs. And with more people watching TV shows online according to their own schedules, live sports are one of the few things left on TV that bring entire families together to watch in real-time.
On New Year’s Day, the biggest cable audience ever tuned in to ESPN’s new college football playoffs, with 28.2 million viewers watching the Rose Bowl game between Oregon and Florida State, and another 28.3 million catching the Ohio State-Alabama game. Then on Saturday, the NFL wild card game between the Arizona Cardinals and the Carolina Panthers became the eighth most-watched cable program ever, drawing 21.7 milion viewers.
The shift to digital is a high-risk bet for the television industry, which has been dependent on one reliably lucrative model for decades. Companies like Disney-owned ESPN charge cable and satellite companies a certain amount per customer for their programming. The cable and satellite companies in turn charge consumers an average $95.73 per month, according to media research firm SNL Kagan.
Subscriptions to Hulu, Netflix and Sling TV are less than half that amount, though they could also quickly add up.
If too many consumers abandon their Dish Network subscriptions in favor of Sling, the satellite company could lose too much in revenues from its core business.
“This is a game changer for the industry because Dish has be sure it doesn’t cannibalize its existing customer base,” said Chris Young, an analyst at SNL Kagan. “ESPN is a must-have on the basic cable platform and the big question is if $20 is the right point for consumers to push back on cable.”
Some popular cable networks such as Fox News and AMC have not indicated any plans for their own stand-alone streaming services. But by waiting out the shift, they could risk being left behind, if consumers think their presence alone isn’t enough to justify a big cable bill.
Dish Network says its market studies show that most interest in Sling TV will come from millennials who have never subscribed to cable or satellite and probably never will. To appeal to these estimated 12 million consumers, Dish won’t require contracts, credit checks or installation fees.
But to prevent families from cutting their satellite television subscriptions for Sling TV, Dish said the online service will only play on one device at a time. In other words, if you want to play ESPN on your phone and your tablet, you’ll have to pay $40 per month.
“Sling TV provides a viable alternative for live television to the millennial audience,” Dish CEO Joseph Clayton said Monday in a speech at the International Consumer Electronics Show in Las Vegas.
Disney, too, praised the announcement, saying the move won’t hurt its cable network.
“We are excited to see our innovative efforts with Dish come to fruition with this value package targeting the 12 million broadband-only households,” Disney said in a statement. “This will support the overall multichannel subscription model, while offering viewers yet another way to access Disney and ESPN content.”
But millennials may not be the only ones interested in these streaming services. Older audiences have also expressed frustration with ever-increasing cable bills. Industry experts say it’s only a matter of time before masses of consumers flock online as an alternative to cable.
“This is huge. For the company that has most vigorously resisted offering its premier sports channel separate from the broad bundle of Disney programming, this is a sea change and indication that a la carte cable has finally made it over the hump,” said Gene Kimmelman, president of public interest group Public Knowledge, which has advocated for channels to be offered a la carte for consumers.
“Once you offer ESPN online on its own, it is only a question of time before consumers demand more ways to pick and pay for only the channels they want,” said Kimmelman.