Thinking about joining the ranks of cable cord-cutters and signing up for Sling TV? Better act fast.
The companies whose channels are included in Dish Network's new online-TV service are putting caps on the number of people who can subscribe. If the limits are exceeded, content companies may have the right to pull their shows and movies, said Geetha Ranganathan, an analyst at Bloomberg Intelligence.
Subscriber caps are a way for the media industry to cope with an increase in viewers shunning traditional pay-TV packages with their hundreds of channels -- many never watched. Programmers like Walt Disney Co. and Time Warner can't ignore the rise of online options, yet don't want these cable alternatives growing too fast. Cable companies pay fees to programmers based on their subscribers. If large swaths drop pay-TV plans for Sling TV or Apple's planned service, it would mean less money for cable operators and certain programmers alike.
"They want it to be a complementary product and not a competing product that cannibalizes their core business," Ms. Ranganathan said. "They don't want it to become too popular."
Programmers want the skinny bundles to help them reach the estimated 10 million or so broadband subscribers who don't opt to buy pricey pay-TV packages, while making sure those less-costly plans don't encourage people to cut the cord with cable and satellite operators.
Not just streaming services capped
"It's still early stages," said Amy Yong, an analyst with Macquarie Group. "They're all testing the market."
Subscriber limits aren't new. Cable companies that offer similar low-priced packages with a dozen or so channels are often restricted to sign up no more than 10% of their customers to such plans, said Rich Fickle, CEO of the National Cable Television Cooperative in Lenexa, Kansas. That way, programmers can ensure their channels on pricier tiers have a large enough audience to maintain advertiser interest, he said.
Sling TV, introduced in February, offers about 20 channels for $20, including Time Warner's CNN and TBS, as well as ESPN, Disney Channel and AMC, and provides sports and entertainment series such as "Monday Night Football" and "The Walking Dead."
Apple plans to debut a service this year with about 25 channels, according to people with knowledge of the matter. Verizon Communications, the largest U.S. wireless carrier, also intends to enter the web-based streaming market with a slimmed-down package.
So far, Sling TV has signed up at least 100,000 subscribers, the technology site Re/Code reported last month. By comparison, online video-subscription service Netflix has more than 57 million members worldwide, with more than 39 million in the U.S.
Danielle Johnson, a spokeswoman for Englewood, Colorado-based Dish, declined to comment on the number of people who have signed up for Sling or whether the service has subscriber limits.
Skinny bundles could have trouble gaining traction because their content is limited or their price is too high to attract a large number of pay-TV subscribers, Todd Juenger, a media analyst at Sanford C. Bernstein & Co. in New York, said in a March 26 note to clients.
But industry executives still want to make sure they don't get too popular and cite subscriber caps as a reason why the traditional pay-TV bundle is safe.
"Sling is by its agreements with the content owners itself limited to be sold to people that don't have cable, with a limit of 2 million subscribers," Discovery CEO David Zaslav said at a media conference last month. "I don't see à la carte or different bundles really having much of an impact here in the U.S."
None of Discovery's channels is currently in Sling TV's lineup.
Agreements that use subscriber caps are "a constructive way to make an offering to a given part of the market that does not undermine the other part of the market," Time Warner CEO Jeff Bewkes said at a media conference last year.
But as the lower-cost packages increase in popularity, it will put pressure on cable networks and pay-TVdistributors to reassess those limits, said Mr. Fickle, whose group negotiates programing contracts on behalf of 900 smaller cable-TV providers.
"It's going to grow, it has to," Fickle said. "Current programming agreements have problems in adapting to that."
~ Bloomberg News ~