A new study by MoffettNathanson Research finds that new OTT services like Dish Network’s Sling TV that offer no or limited broadcast networks aren’t likely to be able to “attract a sizable customer base.”
The best hope of the new breed of OTT TV services is for them to include the broadcast networks, which reach seven times more viewers than the average cable network and two times more than the most popular cable networks.
That’s according to the boutique equity analysis firm of MoffettNathanson Research.
Marketing themselves as alternatives to full-blown cable and satellite services, two low-cost OTT services with smaller packages of networks have emerged in recent months.
Dish Network’s Sling TV offers a basic service of 17 channels for $20 a month, but comes with no broadcast signals.
Sony PlayStation Vue began service in three markets last week, offering an entry-level access tier of 53 channels for $50. The package includes CBS, Fox and NBC, but not ABC.
And according to The Wall Street Journal, Apple with soon enter the market with a package that includes ABC, CBS and Fox, but not NBC.
According to the research, the prospects for the services depend on their ability to include broadcast signals.
The absence of broadcast signals on the Dish service limits its potential, the research says. “We don’t believe the service offers enough to attract a sizable customer base.”
The Sony service will also have trouble “attracting a meaningful number of subscribers” without ABC and the other Disney-owned networks, it says.
However, the research says, Apple TV could make it if it is able to combine the CBS, ABC and Fox broadcast networks along with the cable networks of 21st Century Fox, Disney, Discovery and Viacom.
“This could be a real attractive offering for both ‘cord nevers’ and existing pay TV subscribers. Apple may decide that making any profit for the first few years … is secondary to bringing new subscribers within its ecosystem and getting to the scale needed down the road where its OTT offerings could generate profits,” it noted.
The research is based in part of an analysis of two years of Nielsen ratings, which concludes that the reach of broadcast networks “far exceeds” that of cable networks.
“In 2014, the average big four broadcast network reached 41% of U.S. people ages 2+ each week — more than seven times average reach of an average cable network,” the research says.
While the broadcast networks were clustered around the their average weekly reach, there was a wide disparity in the reach of the cable networks.