NEW YORK (MarketWatch)—The success of Dish Network’s new service, Sling TV, will depend on networks willing to take a risk and a high level of online advertising, says media analytical firm SNL Kagan.
Dish DISH, -1.85% during last week’s 2015 Consumer Electronic Show, announced its answer to the millennial generation not buying into cable TV subscriptions—Sling TV. The $ 20-a-month service offers access to 12 networks: ESPN, ESPN2, TNT, TBS, Food Network, HGTV, Travel Channel, Adult Swim, Cartoon Network, Disney Channel, ABC Family and CNN, according to a news release.
In a report Monday, SNL reporter Joseph Williams and analyst Michael Kane delve into what’s going to keep the millennial-geared service afloat as it looks to move in along side Netflix NFLX, +0.14% Hulu and Amazon Prime AMZN, -0.50%
Sling TV, which will cost members $ 20 a month, will deliver network shows with Dish directly controlling the distribution of the content, often referred to as over-the-top servicing. Netflix, Amazon and Hulu are all over-the-top services.
“While Sling will collect advertising dollars, subscription fees will likely offset the affiliate costs for the (over-the-top) OTT programming,” Williams wrote in the report.
On top of the $ 20 a month for the 12 basic networks, subscribers have the option of add-ons that run $ 5 extra a month. Dish says it will have a children’s, news and information and sports extra available, and it plans on rolling out more packages.
Right now, the total amount Sling TV will pay out to affiliates per subscription is about $ 12.77, according to the report. Based on the subscription price, that leaves $ 7.23 in revenue per subscriber.
“What I will say is we plan to add more content into that base package over time, so our [$ 20] price that we charge has some headroom to add additional content,” Sling CEO Roger Lynch told SNL. “From an economic standpoint, it’s very similar to the regular pay TV model. The thing is for us to have more packaging flexibility because we can’t just do the big, bigger, biggest packages and reach the demographics that we want to reach.”
That demographic is millennials, generally those aged 18-34, and probably more so than any other generation they want media and information now, uninterrupted. Sling TV must count on some advertising dollars as well.
Kane said in the report that ESPN, the most expensive network per subscription at $ 6.55, will bring in the most advertising dollars—$ 2.13 billion in 2015. Sling TV’s second-most expensive, TNT, is also its second-highest ad revenue draw. Kane estimates TNT will add $ 1.35 billion to the pot.
Sling TV, however, decided to ditch traditional TV advertising, choosing a style closer to the online advertising seen on YouTube and Hulu.
“For content that’s in video on demand or replay—where you can go back three days—an ad three days ago may no longer be relevant today,” Lynch said.