Dish’s $30 OTT deal a loss leader that will bring in subs, draw Millennials

By Jim O'Neill on Jun 12 2014 at 9:00 AM

Last week, Bernstein Research’s Todd Juenger posited that satellite TV provider Dish Network could put together a pretty solid array of content for the $30/mo. Internet TV service it wants to offer.

The cost? About $22 in monthly fees per subscriber for a line up that included the four major networks, CW, ESPN and ESPN2, Disney, USA, Nick, FX, MTV, AMC, ABC Family, SYFY, Adult Swim, FXX, Comedy Central and G4.

But, Juenger said, those fees per sub didn’t leave much room for profit. Once you add in broadband fees, the value proposition becomes difficult to discern.

Perhaps.

Wednesday, at the TV of Tomorrow Show in San Francisco, Adam Lowy, Dish’s GM of interactive and advanced TV, told an audience that the market segment the satellite provider was going after included “cord cutters, cord nevers and what we call cord haters.”

That’s become an increasingly large market and, with Millennials at the heart of “cord-nevers,” a critical one.

Consider this:

Experian contends that cord cutting is growing slowly, but inexorably. In a recent report, it said about 7.6 million (6.5%) of U.S. households counted themselves as cord cutters in 2013, compared to 5.1 million households (4.5%) in 2010. The percentage of younger consumer households, aged 18-34, not subscribing to pay-TV sources was 12.4%, up from 7.9%.

It also found that a whopping 24% of households inhabited by an adult under 35 who subscribes to a streaming service go without pay-TV, about 4X the national average.

Sony, meanwhile, said it found about one-quarter of Millennials are unreachable through traditional TV, a number it expects to grow.

The OTT pay-TV offering Dish is putting together reminds me a lot of that big sale on ribeye steaks that grocers have every Father’s Day, you know the one that offers a prime cut for just a couple of dollars more than ground beef.

It’s a loss leader.

You know how it works, you run in to pick up a couple of steaks and end up walking out with a bag of charcoal, some potatoes, zucchinis, a case of beer, maybe some chips... maybe even some new grill tools. You get the picture.

Dish’s $30 play may not get cord-nevers walking out with a cart full of products, but they will, at least, be subscribers, albeit bargain shoppers.

Dish’s Lowy Wednesday also pointed out that there won’t be any contracts to keep those cord nevers tied to the service, no complex service agreements or equipment to deploy – and recover if a customer stops paying – just a monthly fee.

"At any time, if you don't pay, it's over," Lowy said. "The consumer is going to win out in the end."

That attitude alone wins Dish big props in my book.

We’ve all heard content owners and service providers say “content is king,” but, at the moment anyway, the consumer has the keys to the castle.

Follow me on Twitter @JimONeillMedia

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