It is exactly two years since DISH Network, the U.S. satellite Pay TV giant, launched its standalone Pay Lite (Skinny Bundle) service Sling TV at CES. Some people think this kind of offer represents the future of TV – including Sling CEO Roger Lynch. At the Akamai EDGE 16 conference in San Francisco during October he stated: “The future of TV, I believe, is going to be streamed.”
He went on to discuss the evolution of telephony, from human telephone operators who physically connected our lines to digital switches and then software applications like Skype. “I think the same path will be followed by video and traditional TV, moving from analogue to digital and then software applications like Sling.”

That is a long-term vision but Lynch has an interesting view about the role of Pay Lite in the current market. He describes Sling TV as a mobile-first service and says we should compare it to a music service like Spotify rather than a [traditional] Pay TV offering like Comcast or DISH Network.
“When consumers engage with Spotify for the first time they download a mobile app and start a free trial. There are no contracts and there is no installation. That is how most people start a relationship with Sling TV.”

Launched at CES 2015, Sling TV won multiple awards for its no-contract, $20 per month multiscreen service. Originally it targeted the millennials that traditional Pay TV was not reaching, covering cord-cutters and cord-nevers, some of them in broadband-only homes. Since launch it has expanded its remit to attract a broader demographic including people in existing Pay TV homes.
“There is a growing number of people frustrated with high prices and long-term contracts and equipment fees,” Lynch told the Akamai EDGE audience. Recent Sling TV marketing campaigns have focused on the idea of taking back control, with the strapline, ‘Take back TV’.

So far, there has also been a clear functionality gap between all Pay Lite services and traditional Pay TV platforms, with the former generally having lower resolution and no personal recording capability – only on-demand assets. This is what you might expect, given the low prices and single-month contract commitments on the Pay Lite packages.

The current difference between the Sling TV and DISH satellite services illustrates the point. With DISH you get the Hopper whole-home entertainment gateway, including DVR with 2Tb of memory and 16 tuners that mean you can watch TV on seven televisions at the same time, including six fed by Joey client set-top boxes. The top Sling TV package, Blue, currently supports three concurrent streams.

The DISH satellite package includes the PrimeTime Anytime feature (giving you a constant recorded loop across all the major broadcast networks) and AutoHop (the ability to automatically skip advertisements on popular recorded shows). A subscription also gives you comprehensive multiscreen viewing and whole-home music services.

Despite this, there is no deliberate strategy at DISH to use technology to maintain the differentiation between the Pay Lite and the traditional full-flavour Pay TV markets. Vivek Khemka, President, Echostar Corporation and CTO at DISH Network, is not prepared to limit the features on Sling TV to maintain a technology dividing line. He does not even rule out 4K content on the Sling TV service.
“Sling TV is differentiated around the business model – no contract, no commitment, no installation; you sign-up and watch TV in a few minutes. We have aggressively delivered smaller packagers rather than a big bundle,” he notes. “You do not have all the programming that DISH offers, and that is by design.

“Sling TV is still evolving and we do not intend to make it in any way inferior to the full Pay TV experience. We have a philosophy where we want to embrace change and if people want streaming TV, then so be it. There is no reason to fight that or prevent it from happening by making Sling an inferior service.”
To demonstrate the point, Sling TV introduced a beta programme for cloud DVR in December, initially for invited customers using Roku streaming players and Roku TVs. You can record movies, episodes and full series, and pause, rewind or fast-forward recorded content. As this is cloud recording, users can ‘record’ multiple programmes simultaneously.

There is no 28-day restriction on recordings and the system manages space automatically – deleting the oldest recordings first when you run out of space. Planned features for the future include storage upgrades and the ability to protect recordings.

Reducing the functionality gap beween Pay Lite and traditional Pay TV is not entirely without risk. The segmentation of the full-flavour Pay TV market has long been associated with technology and choices to be made between standard-definition and HD, or between zapper boxes and DVRs. Guy Bisson, Research Director at the UK-based research and forecasting firm Ampere Analysis points out: “Our research shows that high value Pay TV customers who take sports and movies and other top tier content tend to be very driven by technology. They are keen on the latest technology and high functionality – things like HD and DVR.”
He thinks there is a possibility that if the functionality gap between Lite and basic traditional services narrows, churn could result. “Can you offer HD or better on a Skinny bundle without cannibalizing the main package?

I don’t think so,” he says. “I don’t know where the [functionality] line is that will prompt churn. For some people it is the availability of HD and for others it would be DVR storage and for others it would be the [DVR recording] series link feature.
“The reasons for staying with a high-end service are being eroded all the time. Each person may have their own inflection point where they don’t need the full package anymore.”

This will not stop DISH from its goal of making Sling TV as good as it can be. The company has a high-level philosophy that it must never fear change. And at the Akamai EDGE 16 conference Lynch gave a revealing insight into the big thinking behind his standalone Pay TV OTT service.
Charlie Ergen, the CEO at DISH Network, called him in 2009 to discuss the future of TV. “I flew to Denver. He had a big satellite TV business and was worried it would reach saturation and he wanted to think about what came next. I was interested in how the Internet could be used to replace satellite TV. He brought me onboard to build a new company that ended up being Sling TV.

“We thought it could be done in a couple of years but boy, were we wrong. The tough part was not the technology but getting the programmers onboard because it had the potential to disrupt an industry that had been so good for them. We argued that disruption was coming anyway and we were able to get them, but it took much longer than we thought.”