Ergen: OTT Subs Cheaper to Acquire

Dish pokes fun of equipment costs tied to traditional pay TV services in a promotion for Sling TV, its over-the-top subscription video service.

With customer premise equipment like the Hopper DVR and free programming promotions pushing Dish Network subscriber acquisition costs to more than $1,000 per satellite TV subscriber, CEO Charlie Ergen says Dish could generate higher profit margins if it succeeds in convincing more consumers to opt for its over-the-top Sling TV product.

As Sling TV chief Roger Lynch noted Wednesday, most consumers that take the $20 monthly subscription service use streaming video devices purchased in retail outlets, including Roku players, smart TVs or Web browsers running on laptops. “He [subscriber] might have just clicked on the Internet, and bought the service. Your SAC [subscriber acquisition cost] for some customers might be almost zero. And that’s a better model,” Lynch said on Dish Network’s second-quarter earnings call.

In 2012 and 2013, Dish marketed a $19.99 family programming package through its core satellite TV service that included Animal Planet, Food Network and content from Nickelodeon. But with Sling TV giving Dish the ability to reach any viewer with an IP-connected mobile device or TV, Ergen said it makes more sense these days to market so-called “skinny bundles” through over-the-top distribution.

“The video business is going to be much more competitive, so you’ve got to be a little bit more careful about the customer you bring on at an $800-plus SAC today, whereas 10 years ago, he had three options. And today he’s got four or five or six options, and he’s going to have 50 or 60 [MVPD] options in the future probably,” Ergen said Wednesday.

“If you bring a person in on the Sling side, of course your SAC is materially less, your ARPU [average revenue per unit] is less, but the value of that customer … should be about the same. And so when we focus internally now, this is how we focus on it in terms of putting all our customers together saying, “This customer doesn’t justify coming in on linear TV’,” Ergen added.

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