Will Sling Media Shift Places?
When Sling Media announced on Jan. 31 that it had raised $46.6 million in funding, the consumer-electronics maker received an unexpected congratulatory bouquet of flowers from its rival, Orb Networks. Sling Media and Orb are duking it out in a market for a cutting-edge technology known as place shifting, which lets users watch programming televised in one location from just about anywhere else.
Why the gesture from a competitor? Orb is hoping Sling Media will spend at least some of the money on marketing, creating a buzz about a technology that's so new -- and so swiftly growing -- that both companies will benefit. Whether any Sling Media marketing will ultimately be a boon for Orb remains to be seen. But the market certainly appears to be poised for growth.
Sling Media and its device, the Slingbox, are seen by analysts as shining stars of the emerging place-shifting market. The silvery Slingbox is about the size of a cigarette carton and has a chunky, space-age look. It boasts some pretty impressive capabilities: Attach it to both a TV set-top box and a broadband network, and watch TV or programs stored on your digital video recorder (DVR) from just about anywhere. With a Slingbox, you could fire up your laptop in Tokyo to watch an episode of Desperate Housewives recorded on your TiVo (TIVO) in Toledo.
Some observers think the Slingbox, around since June, is as revolutionary as the TiVo, which has left its own indelible mark on the set-top box and DVD player industry (see BW, 12/19/05, "The Best of 2005"). Sling Media doesn't disclose sales figures, but anecdotal evidence suggests the Slingbox is catching on. Among some 60,000 items listed in Amazon.com's (AMZN) electronics category, the Slingbox recently ranked as the 36th most-popular product, up from No. 69 about a week earlier and lower than that in prior weeks. Sling Media Chief Executive Blake Krikorian says only that sales have "been quite swift" of late.
Consumers aren't the only takers. Fast-food restaurant chain Dairy Queen uses Slingboxes for remote video surveillance of stores. The gadget helps Walt Disney (DIS) deliver film footage around the world. Professional sports teams use the Slingbox to watch competitors' games while traveling.
To hear Sling Media tell it, the revolution is just getting under way. SlingPlayer Mobile, due out in March, will extend Slingbox's capabilities by letting users watch and manipulate TiVos and TV channels from Windows-based cell phones such as the Motorola (MOT) Q and the popular Treo personal digital assistant. The software was one of the most buzzed-about products at the January Consumer Electronics Show, according to analysts who attended the event in Las Vegas.
Even as the hoopla around Sling Media approaches fever pitch, a slew of companies with rival technologies are sharpening their competing place-shifting efforts. These wannabes include not just startups like Orb and SnapStream (the maker of a rival product called Beyond TV), but also some of the world's heaviest tech hitters. Electronics giant Sony (SNE) and Cisco Systems' (CSCO) newly acquired Scientific-Atlanta set-top box business are pushing into place shifting. Hardware that enables place shifting is expected to rise to $211 million in 2010, from $23 million in 2005, according to chip consultancy iSuppli.
The prospect of going head-to-head with companies like those has analysts such as Sean Badding, president of tech consultancy The Carmel Group, speculating that Sling Media might need to look for a powerful buyer. Contenders might include satellite-TV provider EchoStar Communications (DISH), which participated in Sling Media's latest funding round, and even would-be foes Sony and Cisco, Badding says. Sling Media wouldn't comment on the possibility of a sale.
A sale would give Sling Media access to some badly needed marketing and research and development dollars, which could be used to further simplify the Slingbox setup, for instance. After all, "Sling Media is attempting to answer demand that doesn't even exist," says Phillip Swann, author of influential TV industry newsletter Swanni Sez. "It's going to be a lot of marketing investments to build awareness." As this new technology takes hold, Sling Media might also have to persuade entertainment providers that accessing their content from multiple devices over the Web doesn't infringe copyrights.
Snapping up Sling Media would help larger rivals gain traction in an area where their own efforts have fallen short. Sony's competing product, called LocationFree TV, isn't as easy to use as the Slingbox, says Badding. Unlike the Slingbox, it also has to have a home PC turned on all the time, which some users might view as an inconvenience.
Current efforts notwithstanding, Sony is clearly serious about place shifting. In January, Sony CEO Howard Stringer demonstrated some key new products, and LocationFree TV was one of them. "We are certainly in this for the long term," says Robert Bartels, general manager for Sony's LocationFree.
Sony is likely to become an increasingly tough challenger. Already, Sony's product, which sells for $299 with rebate, offers several advantages over the Slingbox: It works with the popular PlayStation Portable gaming console, for one, and can also function as a wireless access point, enabling broadband access from anywhere within the home (see BW Online, 12/1/05, "Attack of the PlayStation Hackers"). And like Sling Media, Sony is close to releasing a mobile version, allowing users to view home video on a cell phone, a music player like the iPod, or a portable video player, Bartels says.
Sony's main asset, though, is deep industry connections. It's already talking with cable and satellite-TV companies and wireless service providers -- which have long used products such as cell phones made by the Sony Ericsson joint venture -- about using its place-shifting technology as a standard feature for subscribers, Bartels says. Many telcos, in particular, are interested in place shifting, because limited trials of various place-shifting products indicate that users of the technology pay twice as much for higher-quality broadband connections and other services than other customers.
Orb is also a force to contend with. The company is conducting trials with two major European wireless carriers that are considering place-shifting software for their phones, says Orb CEO Jim Behrens, who declined to name the possible partners.
Here's why this makes sense for the service providers: Each time a user watches a video on a cell phone, the carriers will get paid per-minute network usage charges or for unlimited monthly data usage. In fact, some industry insiders already hail place shifting as the killer application that will make wireless providers' multibillion-dollar next-generation buildouts worthwhile. To be sure, few forecasts exist on how much carriers stand to profit from this technology, and critics say that carriers might root for mobile-TV services instead. With mobile TV, carriers can allow users to download short snippets of news or sitcoms for a monthly fee.
And in the second half of 2006, Orb software -- released eight months ago and enjoying "into six figures of users" -- will start being bundled onto PCs from several major manufacturers, Behrens says. Many manufacturers using Intel's (INTC) ViiV technology for entertainment PCs plan to pre-install Orb, Behrens adds. Unlike Sling Media, which sells its hardware, Orb provides its place-shifting software and Web service to users for free, and makes most of its money from advertising and from fees it charges carriers.
Sling Media soon could start facing steep competition from set-top box and DVR makers, which already have an in with cable and satellite-TV service providers. At the January CES, Cisco's Scientific-Atlanta business demonstrated home DVR access from a PC -- a capability similar to that offered by the Slingbox. It also unveiled a cell phone that could access DVR content. While the company remains mum on actual product plans, "we are working very closely with our customers [such as cable companies on these functionalities]," says Adam Mayer, director of strategy and business development at Scientific-Atlanta. "[The capability] is certainly being talked about more."
Eventually, place shifting could simply end up becoming a standard feature on set-top boxes and DVRs, say analysts. And where would that leave Sling Media? The company could license its knowhow. "We don't have religious issues about where this technology ends up residing," says Krikorian. Sling Media holds a number of existing and pending patents.
And Sling Media is readying other products. For starters, it's working to integrate its technology with EchoStar portable viewing devices. Last fall, EchoStar released its PocketDISH handheld, allowing for download of TV content and music.
In the second quarter, Sling Media will release new software for TV channels to be viewed remotely on Apple's (AAPL) Macs. In the first half of 2006, it will march into Europe with a release of a personal-assistant-link version of its Slingbox. And Sling Media is working on a whole range of new consumer-electronics devices. "It'll likely continue to be ahead of the R&D curve," says Badding.
Another Sling Media advantage: high margins. When iSuppli took a Slingbox apart recently, it calculated that the box's components cost about $83.60. Considering that a Slingbox sells for $249.99, "it's more profitable than a lot of other products we've seen," says Andrew Rassweiler, senior analyst for iSuppli, which has performed similar analysis on DVRs and set-top boxes. While the iSuppli Slingbox teardown didn't take into account costs of related software, chances are that Sling Media enjoys fat margins that could allow it to slash prices. That's a tool the outfit is likely to need when -- not if -- the competition mounts.