Big Cable Resists a Slingbox Solution

Slingbox

By Alex Sherman

Cable TV executives are constantly talking about “TV Everywhere”—shows and movies available anywhere at any time. The Slingbox, a $180 gadget that lets users watch live TV via any Internet-linked device, would seem to dovetail nicely with that vision. Yet the cable industry has shown little interest in the technology. Comcast and Cox Communications, the No.?1 and No.?3 cable operators, say Sling isn’t a good fit for their services. And No.?4, Charter Communications, “has plotted a different route to?…?TV Everywhere,” says Rich DiGeronimo, the company’s chief for product and strategy.

One reason for cable’s reluctance to embrace Slingbox is its ownership. The technology is controlled by Dish Network, a satellite TV provider and a longtime cable rival. “Why help a competitor?” asks Amy Yong, an analyst at Macquarie Securities in New York. “The Comcasts of the world?…?are big enough that they can develop this internally.”

Now, Sling may get a lift from an effort to persuade second-tier cable companies to buy set-top boxes with the technology. The devices are being made by EchoStar, which like Dish Network is controlled by Denver billionaire Charlie Ergen. On June 14, EchoStar unveiled a line of set-top boxes that are “SlingLoaded,” letting users watch live TV anywhere there’s an Internet connection. EchoStar says three cable systems have agreed to test the new products but declined to name them. If smaller cable players succeed with Sling, the company believes, the industry leaders may warm up to the technology.

With varying degrees of success, the biggest cable operators have tried to develop TV Everywhere offerings on their own. Cable systems typically let subscribers access reruns and movies via websites or mobile apps, but they don’t offer first-run shows or live broadcasts such as football games outside the home. And content providers aren’t eager to share potential mobile revenues with the cable companies. Viacom, owner of MTV, Comedy Central, and other networks, on June 23 filed a lawsuit against Cablevision, saying a Cablevision app that lets users watch live TV on an iPad anywhere in their home violates the terms of their contract. Cablevision denies the claim. Time Warner Cable and Viacom have entered into a standstill agreement to try to resolve similar suits. “The larger cable guys?…?have tested the water, and they’re getting a lot of pushback” from networks, says Alistair Chatwin, EchoStar’s director for product development.

Chatwin says Sling offers a solution that’s legally in the clear and better than anything cable companies have, because it lets users watch live shows not just at home, but anywhere they have an Internet connection. (The Viacom cases don’t address the issue of access away from home, which cable executives say will be even more complicated to work out.) The U.S. Copyright Office has said Sling doesn’t violate any laws, and the company says no one has sued it since its founding in 2004.

EchoStar needs a success with the new boxes. Dish Network accounted for 83 percent of EchoStar’s revenues last year. The two were a single company until 2008, when Ergen split them into a service provider and a manufacturing arm. (The precursor company, EchoStar Communications, in 2007 paid $380 million for Sling Media.) “Many of our potential customers have perceived us as a competitor due to our affiliation with Dish Network,” EchoStar noted in its annual Securities and Exchange Commission filing last year.

Ergen’s presence at the top of both entities—he’s chairman of EchoStar and Dish—doesn’t help relations with cable companies. He has spent years demonizing the industry and once ran ads urging consumers to “Stop Feeding The Pig” by subscribing to a handful of dominant cable companies. Blake Krikorian, who co-founded Sling with his brother Jason, says he agreed to sell Sling because he thought Ergen would step away from the manufacturing arm. Krikorian’s hope was that multiple video providers, including Comcast and satellite rival DirecTV, both of which expressed interest in Sling, would buy stakes in the company and share Sling’s technology. “I’m very disappointed that Charlie didn’t entertain the opportunity to have other video providers invest in Sling,” Krikorian says. Ergen declined to comment for this article.

Michael Hawkey, EchoStar vice-president of sales and marketing, says the cable industry should get over its fear of Ergen and instead focus on the bigger issue: the legal fight over access to video on the go. He also urges cable and satellite companies to band together and share technology to fend off Netflix, Apple, and other new rivals. “What’s more frustrating for cable, working with a company that’s significantly owned by Charlie or fighting lawsuits with content providers?” says Hawkey. “I think we can make this happen.”

The bottom line: Although Slingbox has gained little traction with cable companies, EchoStar is hoping deals with smaller players will boost sales.

Sherman is a reporter for Bloomberg News.

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