Light Reading

No Mickey Mouse Deal for Dish

Alan Breznick
3/4/2014
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With just a couple of pen strokes, the Walt Disney Co. and Dish Network have altered the landscape for the streaming of traditional TV programming to multiple screens inside and outside the home.

Walt Disney Co. (NYSE: DIS) and Dish Network LLC (Nasdaq: DISH) announced a landmark pact Monday night that will allow Dish to become the first US pay-TV provider to stream ESPN, Disney Channel, ABC, ABC Family, and other popular Disney-owned networks to broadband subscribers. Thus, the deal enables Dish, the third-largest pay-TV provider in the US, to establish its own, over-the-top (OTT) video subscription service that could potentially compete with conventional pay-TV services.

As spelled out in the Disney press release announcing the agreement, the deal "grants Dish rights to stream cleared linear and video-on-demand content from the ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN, and ESPN2 as part of an Internet-delivered, IP-based multichannel offering." Further, "Dish customers will be able to access Disney's authenticated live and video-on-demand products, including WatchESPN, WATCH Disney, WATCH ABC Family, and WATCH ABC using Internet devices in the house and on the go."

While Dish officials have not spelled out when they will launch such an OTT service, they are clearly working on it. On the company's fourth earnings call with financial analysts late last month, Dish Chairman Charlie Ergen said the company is also negotiating with other major programmers for multiscreen streaming rights so it can go OTT. "When they're ready, we'll be ready," Ergen said.

In a note to clients Tuesday morning, Craig Moffett, a principal and senior analyst for MoffettNathanson, said it appears that a Disney-Dish OTT service would initially target just the 5 million to 10 million US broadband homes that don't subscribe to a traditional pay-TV service. That way, he said, Dish would deliver Disney content to more homes without cannibalizing Disney's huge cable, satellite, and telco TV customer base. "As we have heard in our prior discussions with other OTT startups, content owners have been focused on creating bundled structures that limit the risk of a la carte disintermediation," Moffett wrote.

Even if that's so initially, though, the genie will be firmly out of the bottle. Once such an OTT service gets off the ground, it will be difficult, if not impossible, for Dish and Disney to restrict it to just broadband-only subscribers. Plus, there would be nothing stopping existing pay-TV subscribers from simply cutting the video cord and then opting for the broadband video bundle instead.

The ground-breaking deal between Dish and Disney also sets the stage for Disney to strike similar multiscreen streaming deals with other major service providers, such as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), DirecTV Group Inc. (NYSE: DTV), Verizon Communications Inc. (NYSE: VZ), and AT&T Inc. (NYSE: T). Several of those provides have already indicated interest in going OTT at some point, especially Verizon with its recent purchase of Intel Media's OnCue cloud TV platform. (See Verizon Snatches Intel Media Assets.)

None of those providers may have the exact same leverage as Dish, which has been battling with Disney for months over the AutoHop ad-skipping feature of the satellite TV provider's Hopper DVR. In return for the OTT rights to the Disney channels, Dish agreed to disable the AutoHop functions for ABC content within The Nielsen Co. 's three-day TV ratings window. In turn, Disney agreed to drop its lawsuits over AutoHop. (See DISH Upgrades Hopper Software.)

But, like Dish, the other major pay-TV providers should still have plenty of clout in their negotiations because Disney is also seeking to gain greater carriage of some of its younger networks, especially its latest college sports networks, SEC ESPN Network. In the deal with Dish, for example, Disney won satellite TV carriage of such newer digital channels as Disney Junior, Fusion, ESPN Goal Line, ESPN Buzzer Beater, Longhorn Network, and the soon-to-be-launched SEC ESPN Network.

Likewise, the Dish-Disney deal clears the way for other major programmers to strike streaming pacts with the big pay-TV providers. Although several programmers have already moved in that direction, others have held off, fearful of cannibalizing their existing pay-TV customer bases.

So it's no longer a question of whether pay-TV providers and programmers will go over-the-top. The real questions are who will go first and how soon. And the answer to the first question appears to be Dish Network.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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DHagar
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DHagar,
User Rank: Light Sabre
3/6/2014 | 12:47:48 PM
No Mickey Mouse Deal for Dish
@albeznick, that would be interesting; they are certainly in a position to move that way.  They have several moves they can make to increase their market position - all favorable as I see it.

DHagar
albreznick
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albreznick,
User Rank: Blogger
3/5/2014 | 9:42:21 PM
Re: No Mickey Mouse Deal for Dish
OK. So to me the big question is whether Dish will take this budding OTT service nationwide and actually compete with its own satellite TV service, as well as all other traditional pay TV providers. Wouldn't it be fun to see Charlie Ergen compete with himself? 
DHagar
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DHagar,
User Rank: Light Sabre
3/5/2014 | 12:10:33 PM
No Mickey Mouse Deal for Dish
@kq4ym, interesting question.  I vote that it is that they are taking this road to retain customers plus attract the untapped market of customers not paying for TV.

DHagar
kq4ym
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kq4ym,
User Rank: Light Sabre
3/5/2014 | 10:55:13 AM
Re: No Mickey Mouse Deal for Dish
One might wonder is the Disney/Dish deal was just a way to settle the lawsuit over Dish equipments ability to scrub commercials. Or, a way to allow Dish to gain or reatain customers who might be thinking of cutting the cable. But, unless a new tech overruns streaming content, the probable future of enterainment programming, the cable/satellite companies have to be alert to find ways to maintian their high profit margins.
DHagar
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DHagar,
User Rank: Light Sabre
3/4/2014 | 10:41:44 PM
No Mickey Mouse Deal for Dish
@MikeP688 - Exactly, This Disney/Dish deal changes the context and level of competition.  I believe they will set a higher standard of options and the bundled combination will be highly attractive.  This could be a win/win for everyone.  While Comcast is focusing on dominating, this appears to be a new model of offerings.

DHagar
MikeP688
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MikeP688,
User Rank: Light Sabre
3/4/2014 | 8:57:56 PM
..and Dish will have the bandwith to deal with it...:-)
Dish swept all the latest wireless spectrum access which will give it further capabilities as it broadens its reach and creates the alternatives,  I have to wonder how  the new "Comcast/TWC" juggernaut emerging will deal with this challenge. 
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