Surprise: Cable viewers really like YouTube on their set-tops

Looks as if cable subscribers really like online video, especially if they can access it on their existing boxes: UPC Hungary’s experiment to add YouTube to its set-top boxes has been a big success, according to a new case study by cloud virtualization provider ActiveVideo, whose technology is bringing the video service to Hungary’s TV viewers.

UPC started to make YouTube available to 200,000 of its 910,000 video subscribers last summer, and brought it to another 320,000 subscribers in the following months. Sixty-eight percent of those subscribers have since tried the YouTube app on their set-top box, and 83 percent of those who tried it have turned into repeat users. All together, these subscribers view more than 1 million minutes of YouTube content a day, with sessions averaging 45 minutes.

What’s impressive about these numbers is that UPC isn’t actually using any kind of special next-generation set-top box hardware. Instead, it is transcoding YouTube in the cloud, and presenting everything from the clips to the app menus as a single video stream that can be displayed by any plain old set-top box. And yes, you can take “plain” and “old” very literally, in this case: Most of the 320,000 boxes that were added to the mix in recent months are standard definition only.

ActiveVideo’s technology even makes use of existing remote controls by translating each key press to a command that is sent to the cloud to instantly change the stream for a subscriber, making it look as if he is browsing an app installed on the set-top box itself. This kind of cloud virtualization technology is similar to OnLive’s cloud gaming technology or the way Android Auto uses in-dash displays as extensions of your handset.

UPC Hungary, which is part of the Liberty Global family, isn’t the only TV provider experimenting with online video services on pay TV boxes. Netflix struck a partnership with Dish late last year to bring its app to Dish’s Hopper DVR, and is looking to sign similar deals with other TV operators in the U.S. and beyond. And Comcast has been looking to launch its own online video service on its X1 set-top boxes.

Dish’s new Sling TV service liberates ESPN from the cable bundle

There are two ways to look at Sling TV, the new internet-based TV service that will be announced by Dish on Monday at CES: It’s either a poor replacement of what cable has to offer, lacking even basic programming. Or it’s finally a way for cord cutters who don’t want to give up on sports to get ESPN live streaming, plus a few extra stations, for just $20 a month.

Dish President and CEO Joseph Clayton announced Sling TV at CES Monday.

Dish President and CEO Joseph Clayton announced Sling TV at CES Monday.

[company]Dish[/company] revealed not only the service’s name but also key details on programming and price: The base package, which will cost consumers $20 a month, includes live access to ESPN and ESPN2, as well as a couple of other cable networks, including Disney Channel, ABC Family, Food Network, HGTV, Travel Channel, TNT, CNN, TBS, Cartoon Network and Adult Swim. Consumers will also be able to add additional packages, including for news programming, family content and sports, for five dollars each. Sling TV will launch before the end of January, and is already in private beta test with select customers.

Sling Guide

Sling TV will be available over the internet, and consumers will be able to watch the service on the web as well as via Roku, Fire TV, Android TV and Xbox One as well as iOS and Android. Chromecast and Apple TV are notably absent from the list, but Sling TV executives told me during a recent interview that they plan to add additional devices in the near future. Most, but not all channels offer DVR-like pause, rewind and fast forward features. And consumers will be able to access some shows up to three days after they air — but there are once again limits dictated by the contracts that Dish has with TV networks.

Sling TV: Not like any other TV service

Dish is not the only company looking to launch an internet-based TV service. Intel tried the same thing with its OnCue service, but eventually gave up on the idea and sold OnCue’s assets to Verizon. Sony announced its own internet-based TV service at CES in Las Vegas a year ago, and began limited tests of the service late last year. But Sony’s approach is very different from Dish’s: The PlayStation maker has been busy signing deals for big bundles, like the one with Viacom that will bring a total of 22 channels to Sony’s TV service, including not only popular networks like Comedy Central but also little-watched properties like VH1 Soul and Palladia.

“That type of deal that Sony signed with them is not a deal that we would do,” said Sling TV CEO Roger Lynch during a recent interview. He added that Comedy Central content is already “widely distributed,” with consumers being able to watch shows like the Daily Show on the show’s website or on Hulu.

[pullquote person=”Roger Lynch” attribution=”Roger Lynch, CEO, Sling TV” id=”903979″]“ESPN is an anchor.”[/pullquote]

Lynch maintained that the same is true for broadcast networks like Fox or CBS, which Sling TV doesn’t carry. Consumers can access their feeds with an antenna, or catch up on shows on Hulu or elsewhere, he argued, adding: “The fact is that they are already watching it.” Lynch said that Sling TV may add a broadcast tier “over time,” offering consumers to stream content from broadcaster for an extra fee. “We don’t want to force everyone to buy them,” he said.

Sling TV bills itself as complementary to Netflix and Hulu.

Sling TV bills itself as complementary to Netflix and Hulu.

Instead, Sling TV is betting that all of its customers want access to ESPN, which is the service’s crown jewel at launch. Or, as Lynch put it: “ESPN is an anchor.”

That’s an interesting bet, because it could actually work: Sports has been the deal-breaker for many would-be cord cutters, who just hold on to their $100-a-month cable bill because they don’t want to miss their team’s games. With Sling TV, they may now get what they want for just 20 bucks a month. Plus, the basic tier also comes with access to some content from WatchESPN, the sportscaster’s online video service. Specifically, Sling TV subscribers will have access to the ESPN1, ESPN2 and ESPN3 through the WatchESPN  app.

DishWorld will be folded into Sling TV

The move towards new online distribution models doesn’t come out of the blue for Dish. The company acquired online video platform provider Move Networks five years ago, and used the Move team to build out its own online team. That team actually launched a first online TV service in early 2013: DishWorld provides expats in the U.S. with access to live TV networks from countries like India, Brazil or Vietnam.

Sling TV may sound a little bit like Sling Media, maker of the Slingbox, but the two companies don't really have anything in common - except the same corporate parent.

Sling TV may sound a little bit like Sling Media, maker of the Slingbox, but the two companies don’t really have anything in common – except the same corporate parent.

Lynch told me that it’s been a success for the company, helping to grow the audience for international channels, which were previously only available as part of Dish’s service, threefold. He didn’t reveal any subscriber numbers, but said that consumers who do pay for international TV stations through Dishworld watch over five hours of programming via the service every day on average.

Dishworld is currently run by a team of 250 people, and Lynch said that the company plans to staff up in the coming months. “It’s in a way our big beta,” he said. It’s worth noting that this beta test is now over: DishWorld is going to be folded into Sling TV and rebranded as Sling International.

Is Dish suddenly a cord cutter’s best friend?

So will Sling TV eat into Dish’s traditional subscriber base? Lynch and the service’s Chief Marketing Officer Glenn Eisen insisted that won’t be the case, with Eisen telling me Sling TV is a separate business unit with the company that goes after a different set of customers. The service targets people who already have cut the cord, and what he called cord-haters: “Psychologically, they have already cut the cord.”

Household numbers are growing, while pay TV subscriptions are on the decline. Dish views this as an opportunity for Sling TV.

Household numbers are growing, while pay TV subscriptions are on the decline. Dish views this as an opportunity for Sling TV.

That’s nice rhetoric, but it doesn’t hide the fact that Dish is in the long run just as vulnerable as cable. The TV industry has seen a small but notable decline of subscribers in recent quarters, but online viewing has grown rapidly at the same time, suggesting that there may be more radical changes of consumption patterns ahead. Quizzed about this, Eisen and Lynch told me that Dish was cognizant of these shifts, but also optimistic that the industry could return to growth by embracing new models. Said Eisen: “If we care about growing the market, then we had to pivot.”

This post was updated throughout at 12:30pm with additional details shared during Dish’s CES press conference. It was updated again at 2:31pm and 4:28pm to clarify how much WatchESPN is part of Sling TV.

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Every second cord cutter has a Netflix subscription

Here’s another reason that Netflix really wants to be on cable boxes: 48 percent of all households without a pay TV subscription have Netflix, but only 36 percent of households who have cable or another form of TV subscription also subscribe to Netflix, according to a new study from the Leichtman Research Group. This divide also impacts engagement: 32 percent of all pay TV subscribers watch Netflix every day, but 53 percent of all cord cutters stream Netflix every day.

Some of this discrepancy may be due to other options. 62 percent of all pay TV households now have a DVR, which offers them another option to binge watch, and that number is up from 41 percent five years ago. And 59 percent of cable households have used their TV provider’s VOD service before, compared to just 46 percent five years ago.

But Netflix executives also think that it’s about ease-of-access. If their service was right next to TV networks like HBO and Showtime, then pay TV subscribers would be more willing to pay, and tune in more often, they believe. That’s why the company has been busy negotiating with TV operators to bring the Netflix app onto cable boxes. After striking some deals with smaller local operators earlier last year, Netflix announced a major deal with Dish last month that will bring the Netflix app to Dish’s Hopper DVR.

AT&T wants to buy DirecTV for $50 billion

AT&T (S ATT) is in advanced talks to buy DirecTV (S DTV) for $50 billion, or about $100 per share, Bloomberg reported Monday. AT&T’s plan is to turn the satellite company into an AT&T unit, and keep management on board to run that unit, with plans for DirecTV’s chief executive Mike White to retire in 2016. The acquisition report, which neither company is commenting on, comes after three months after Comcast announced that it was going to acquire Time Warner Cable in a $45 billion deal.