360° Coverage : Dish Disney Deal Could Help Speed Cord Cutting Options

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Dish Disney Deal Could Help Speed Cord Cutting Options

Mar 4 2014, 6:43pm CST | by

On Monday Disney and Dish Network signed a long-term agreement that could change the way we watch TV. The deal gives Dish the right to offer Disney channels, like ABC and as importantly, ESPN,...

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21 weeks ago

Dish Disney Deal Could Help Speed Cord Cutting Options

Mar 4 2014, 6:43pm CST | by

On Monday Disney and Dish Network signed a long-term agreement that could change the way we watch TV. The deal gives Dish the right to offer Disney channels, like ABC and as importantly, ESPN, online. Although the details haven’t been worked out, Dish could, at some point in the near future, sell the package of Disney channels to viewers who aren’t Dish subscribers as a standalone option.

This would be a huge development and one that other video providers would be pressured to imitate. Disney offers a slew of Watch apps that let authenticated users watch Disney shows on tablets and mobile phones. But the authentication is the key here. You have to already be a subscriber to a cable company, like Comcast or Cablevision, in order to access the app.

Under the new deal with Dish, the satellite provider has the right to deliver the stations online only.

Dish CEO Charlie Ergen ( who ranks 65th on our Billionaires list with $15 billion) hasn’t been shy about his OTT ambitions. OTT just means offering video service in a way other than traditional cable, FIOS or satellite. In a recent conference call he said:

At some point in time, at some point in time, the video business, as we know today, will change dramatically enough that it will go from the mature — the current business will go from mature business to a declining business. And hopefully, we’ll make up for that, right, in an over-the-top business or a wireless business or other businesses that make sense.

As a trade off to Disney for the extended rights, Dish will shut off its AutoHop function (which allows users to skip commercials) on Disney shows that are being watched within three days of the show airing live. That three-day window is important because right now, advertisers buy time based on how many people watch a show up to three days after it airs.

That’s a huge concession considering ABC and other networks had taken Dish to court over the service. Suddenly, AutoHop looks like more than just a clever service to appeal to subscribers, it looks like a bargaining chip.

So could Dish be about to challenge the cable status quo with a national online offering? There are a few stumbling blocks to that future. One is that Dish doesn’t have a real broadband offering. Subscribers who take advantage of the company’s online services, like PrimeTime Anywhere which allows authenticated users to watch live TV on their tablets and phones, are paying for a cable or telco company to provide broadband or phone service. Even if Dish offered a pure Internet video service, subscribers would have to pay separately for Internet access.

One possible solution: a partnership with Verizon. BTIG analyst Walter Piecyk says such a deal would make sense, especially now that Comcast and Time Warner have opened the video consolidation floodgates. Verizon only has 5 million video customers but it already has a broadband service and its getting into the OTT game with the company’s recent purchase of Intel Media’s online video service. Dish has 14 million customers, existing relationships with all of the major content players and the ability to use its AutoHop chip to negotiate online only deals. From his report (subscription required):

Verizon could negotiate with Disney by themselves but we suspect Ergen would be able to secure a better deal given the leverage of his larger customer base and a concession on hopper advertising. Verizon is obviously not going to buy Dish just for its better OTT rights but it is incremental. Dish also offers Verizon a service organization outside of FiOS areas that could help Verizon deploy wireless broadband and service an OTT customer base.

Dish could also be gobbled up by a deep-pocketed tech company looking to get into the video game. Apple and Google are playing around the edges of this space, a big purchase could make either company a real contender.

The bottom line is that customers who want to watch only the stations they really want (instead of a package of networks) and want to watch online instead of through a cable are becoming more important to video companies and that should ultimate be good for consumers.

Follow me at DorothyatForbes.

Source: Forbes Business

 
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