http://www.forbes.com/2006/08/24/sling-media-qanda-cx_lh_0825sling.html?partner=yahootix
Sling Media made a big splash last year with the debut of Slingbox, a funny-looking device resembling a large, chunky candy bar still in its silver wrapping. Despite its toy-like appearance, Slingbox is a serious piece of hardware that can remotely connect a personal computer to a home television set via the Internet. This enables customers to watch live broadcast, cable or satellite TV, as well as programming stored on a digital video recorder, anywhere they can find a broadband connection.
In January, Sling Media closed on a $46.6 million round of financing led by Goldman Sachs (nyse: GS - news - people ), media and entertainment conglomerate Liberty Media (nasdaq: LINTA - news - people ) and EchoStar Communications (nasdaq: DISH - news - people ), the parent of Dish Network. And this week, Sling Media extended its business to the wireless market with the formal release of software that makes Slingbox compatible with third-generation (3G) handheld devices and cellphones equipped with Microsoft's (nasdaq: MSFT - news - people ) Windows Mobile operating system.
Helped by word of mouth and Sling Media's relationships with major big-box retailers, such as Best Buy (nyse: BBY - news - people ), Circuit City (nyse: CC - news - people ) and Wal-Mart Stores (nyse: WMT - news - people ), Slingbox unit sales to date total "well into the six figures," according to co-founder and Chief Executive Blake Krikorian.
As Slingbox expands its customer base, it could end up drawing some worried glances from big media players. Why? Because the device provides a simple way to deliver existing TV programming to PCs and wireless devices at a time when media giants such as Walt Disney Co. (nyse: DIS - news - people ), Time Warner (nyse: TWX - news - people ) and General Electric's (nyse: GE - news - people ) NBC Universal subsidiary are grappling with how to provide TV content to consumers online--and get paid for it.
In an interview, Krikorian discussed some of the challenges his company faces.
Forbes.com: Swedish satellite carrier Viasat and Brazilian cable TV company TVA recently began offering Slingbox to their customers. Do you expect to enter into similar partnerships with cable and satellite companies in the U.S.?
It's possible. I wouldn't necessarily say we've been seeking them, but we've certainly had a lot of discussions. When we first launched a year ago, everyone was like, "Whoa, what the heck does this thing mean? Oh my God, these guys are tearing apart the entire value chain!" As people have become more aware of how it works and what it means to them, the [cable and satellite] carriers see this as a great way to extend their current offerings.
Take something like cable with high-speed data and television services. What do those things have in common? Not a whole lot, other than that it's on a universal bill. [Slingbox] is finally one of those products that's a true convergence product. It starts to tie these services together. If one of these larger [cable and satellite] operators wants to deploy it, by all means, we will be there to enable them. We've had some very exciting discussions. But at the same time, we're not waiting around for it to happen.
You don't have any partnerships yet with U.S. wireless carriers, which have been launching their own video services. Given the large amount of bandwidth that video requires, how do you respond to concerns that the growing use of Slingbox via mobile devices could cause network congestion?
I would call that a high-class problem. They've built these 3G networks ... and what are the applications that people are going to use? E-mail? On a 2G phone, e-mail's pretty damn good. These various video clips? They're not resonating with the consumer. The fact that there has been some concern about what [Slingbox] is going to do to their networks--that's a pretty flattering thing.
If wireless carriers feel Slingbox poses a significant threat to the sale of their own wireless video offerings, couldn't they try to keep you off their networks?
That's a very interesting question. There's a question of legality of doing that, and then there's just practicality. I think they'd be absolutely nuts to do that, because there is a lot of competition [in the wireless market]. And you know what will happen: One guy does it and ... everyone goes to another carrier. And now with Wi-Max, the competition is going to be more challenging.
[The short video clips that wireless carriers offer] can make sense on these displays. Do we cannibalize that? Maybe. Could we maybe be the ones to help catalyze that? Yeah, I think so. If you are now able to let me watch familiar TV programming--like, for example, Entourage off HBO [through my Slingbox]--that's what I already understand because that's my experience back home. That's the perfect opportunity to tell me [about] the condensed version on my mobile phone. That's back to our desire to work with mobile operators. Do we need them? No. But if we were to tightly couple this, we should integrate this stuff.
The National Football League, Major League Baseball and other content providers have lucrative rights deals with cable systems and wireless carriers. Will Sling also need to pursue licensing agreements with content providers?
We don't think we need licensing or approval from any of the content owners. This is actually helping preserve and helping extend their existing proven business model. We are a "net add" from that perspective. We're increasing the number of displays they can reach me, as a consumer, around the house. We've added another ten to 12 hours a day that they can reach me in the office, where they never could reach me before. And even when I'm traveling outside the market, they're able to still build that relationship with me. This is helping in extending their business and maintaining their relevance. [Slingbox] is something that is so compelling, and there's lots at stake, and there's probably going to be challenges and disruptions. But more often than not, we're finding people open-minded and trying to understand, "How can we use this to our benefit?"
You generate virtually all of your revenue from Slingbox sales. You don't sell advertising, and you don't sell subscriptions to your service. Might this change in the future?
As you build a market, there come more opportunities for other ways to monetize and to provide better experiences to the consumer. [Advertising] is absolutely a potential one. Popping up banners all over the place? The marketplace will not like that. As a business model, there are a variety of ways to deploy those experiences and solutions. Maybe some consumers are like, "You know what? I love that--I love being able to buy the product at retail with no monthly fees." And we have other customers saying, "You know what? Why don't you just give me the box and charge me $10 a month?" There's no reason why we can't do that.
If you start selling advertising, content providers might demand a cut of the revenue.
Possibly. But I also think that to provide the best experience, it would make sense to work with them. They have their own ad sales teams too, right? I try to be really pragmatic. You can deliver great value to the consumer, but you can also find ways to engage with the rest of the industry, provided they have the proper attitude and desire to do so. And I think they do.
Sling Media made a big splash last year with the debut of Slingbox, a funny-looking device resembling a large, chunky candy bar still in its silver wrapping. Despite its toy-like appearance, Slingbox is a serious piece of hardware that can remotely connect a personal computer to a home television set via the Internet. This enables customers to watch live broadcast, cable or satellite TV, as well as programming stored on a digital video recorder, anywhere they can find a broadband connection.
In January, Sling Media closed on a $46.6 million round of financing led by Goldman Sachs (nyse: GS - news - people ), media and entertainment conglomerate Liberty Media (nasdaq: LINTA - news - people ) and EchoStar Communications (nasdaq: DISH - news - people ), the parent of Dish Network. And this week, Sling Media extended its business to the wireless market with the formal release of software that makes Slingbox compatible with third-generation (3G) handheld devices and cellphones equipped with Microsoft's (nasdaq: MSFT - news - people ) Windows Mobile operating system.
Helped by word of mouth and Sling Media's relationships with major big-box retailers, such as Best Buy (nyse: BBY - news - people ), Circuit City (nyse: CC - news - people ) and Wal-Mart Stores (nyse: WMT - news - people ), Slingbox unit sales to date total "well into the six figures," according to co-founder and Chief Executive Blake Krikorian.
As Slingbox expands its customer base, it could end up drawing some worried glances from big media players. Why? Because the device provides a simple way to deliver existing TV programming to PCs and wireless devices at a time when media giants such as Walt Disney Co. (nyse: DIS - news - people ), Time Warner (nyse: TWX - news - people ) and General Electric's (nyse: GE - news - people ) NBC Universal subsidiary are grappling with how to provide TV content to consumers online--and get paid for it.
In an interview, Krikorian discussed some of the challenges his company faces.
Forbes.com: Swedish satellite carrier Viasat and Brazilian cable TV company TVA recently began offering Slingbox to their customers. Do you expect to enter into similar partnerships with cable and satellite companies in the U.S.?
It's possible. I wouldn't necessarily say we've been seeking them, but we've certainly had a lot of discussions. When we first launched a year ago, everyone was like, "Whoa, what the heck does this thing mean? Oh my God, these guys are tearing apart the entire value chain!" As people have become more aware of how it works and what it means to them, the [cable and satellite] carriers see this as a great way to extend their current offerings.
Take something like cable with high-speed data and television services. What do those things have in common? Not a whole lot, other than that it's on a universal bill. [Slingbox] is finally one of those products that's a true convergence product. It starts to tie these services together. If one of these larger [cable and satellite] operators wants to deploy it, by all means, we will be there to enable them. We've had some very exciting discussions. But at the same time, we're not waiting around for it to happen.
You don't have any partnerships yet with U.S. wireless carriers, which have been launching their own video services. Given the large amount of bandwidth that video requires, how do you respond to concerns that the growing use of Slingbox via mobile devices could cause network congestion?
I would call that a high-class problem. They've built these 3G networks ... and what are the applications that people are going to use? E-mail? On a 2G phone, e-mail's pretty damn good. These various video clips? They're not resonating with the consumer. The fact that there has been some concern about what [Slingbox] is going to do to their networks--that's a pretty flattering thing.
If wireless carriers feel Slingbox poses a significant threat to the sale of their own wireless video offerings, couldn't they try to keep you off their networks?
That's a very interesting question. There's a question of legality of doing that, and then there's just practicality. I think they'd be absolutely nuts to do that, because there is a lot of competition [in the wireless market]. And you know what will happen: One guy does it and ... everyone goes to another carrier. And now with Wi-Max, the competition is going to be more challenging.
[The short video clips that wireless carriers offer] can make sense on these displays. Do we cannibalize that? Maybe. Could we maybe be the ones to help catalyze that? Yeah, I think so. If you are now able to let me watch familiar TV programming--like, for example, Entourage off HBO [through my Slingbox]--that's what I already understand because that's my experience back home. That's the perfect opportunity to tell me [about] the condensed version on my mobile phone. That's back to our desire to work with mobile operators. Do we need them? No. But if we were to tightly couple this, we should integrate this stuff.
The National Football League, Major League Baseball and other content providers have lucrative rights deals with cable systems and wireless carriers. Will Sling also need to pursue licensing agreements with content providers?
We don't think we need licensing or approval from any of the content owners. This is actually helping preserve and helping extend their existing proven business model. We are a "net add" from that perspective. We're increasing the number of displays they can reach me, as a consumer, around the house. We've added another ten to 12 hours a day that they can reach me in the office, where they never could reach me before. And even when I'm traveling outside the market, they're able to still build that relationship with me. This is helping in extending their business and maintaining their relevance. [Slingbox] is something that is so compelling, and there's lots at stake, and there's probably going to be challenges and disruptions. But more often than not, we're finding people open-minded and trying to understand, "How can we use this to our benefit?"
You generate virtually all of your revenue from Slingbox sales. You don't sell advertising, and you don't sell subscriptions to your service. Might this change in the future?
As you build a market, there come more opportunities for other ways to monetize and to provide better experiences to the consumer. [Advertising] is absolutely a potential one. Popping up banners all over the place? The marketplace will not like that. As a business model, there are a variety of ways to deploy those experiences and solutions. Maybe some consumers are like, "You know what? I love that--I love being able to buy the product at retail with no monthly fees." And we have other customers saying, "You know what? Why don't you just give me the box and charge me $10 a month?" There's no reason why we can't do that.
If you start selling advertising, content providers might demand a cut of the revenue.
Possibly. But I also think that to provide the best experience, it would make sense to work with them. They have their own ad sales teams too, right? I try to be really pragmatic. You can deliver great value to the consumer, but you can also find ways to engage with the rest of the industry, provided they have the proper attitude and desire to do so. And I think they do.
