Dish-Disney Deal Bodes Well For Affiliates

The Dish-Disney deal got a lot of media play last week, but none of the coverage I saw considered the impact on network affiliates. I guess that is my job.

With the various Disney programming services as charter tenants, Dish plans to launch an online video service that would be the functional equivalent of cable TV circa 1989. It will comprise a bunch a cable networks and the local broadcast signals and sell for $20-$30 a month.

Dish believes such a service will appeal to young people. “We think there is a group of individuals, 18-to-34-year-olds, who would love to have a lower-cost product with some of the top content out there,” David Shull, Dish’s chief commercial officer told Bloomberg. “That’s who we’ll be targeting.”

There will be a few significant differences between cable 1989 and Dish online 2014, however. Dish will not have to worry about stringing wires or installing set-top boxes. It will use the Internet to pump out the service and subscribers will supply their own receivers in the form of computers — desktops, laptops, tablets and smartphones. The service will also include VOD, which really wasn’t practical 25 years ago.

The service goes beyond the online TV Everywhere service that ABC has been slowly rolling out over the past year in cooperation with some MVPDs. TV Everywhere is similar in nature, but restricted to paying cable and satellite subscribers.

The new service that Dish envisions has no bounds. With its satellite TV service stuck at 14 million subs, it can now start fishing with new bait for subscribers among the other 102 million TV homes. And it can do it without an enormous capital investment in a distribution system.

But for Dish to get from press release to market it is going to need more programming. Its deal with Disney includes ESPN, the Disney Channel, ABC Family and the ABC O&Os. But as good as those channels are, they are far from sufficient. Dish will have to cut similar multichannel deals with the likes of CBS, Fox, NBCUniversal, Viacom and Turner.

Most of all, it is going to need agreements with major network affiliates. Just as in 1989, you really can’t offer a multichannel programming service of any kind without the local ABC, CBS, NBC and Fox broadcast signals. Then and now, they are the cornerstones.

In a conference call this week, ABC reassured its affiliates that it is not bypassing them, that its deal with Dish for broadcast signals covers only its eight O&Os markets. In fact, ABC said, its deal should serve as a model for affiliates that want to be a part of the new Dish service.

This is all good news. It means that Dish may be soon be approaching ABC affiliates (and eventually other affiliates) about reopening retrans agreements to include local streaming rights. The affiliates stand to make a little more on retrans and they get their signals onto the Internet where they can be watched on mobile platforms where many young viewers live.

In these negotiations, the affiliates should keep in mind that others will likely come calling with offers for online rights. In January, Verizon announced that it had purchased Intel’s inchoate service, which sounds a lot like Dish’s. Other MVPDs cannot be far behind. Don’t be shy about playing one off against the other, and don’t sell exclusive rights cheap.

Dish will come to the table with some extra leverage of its own.

Remember the AutoHop? That’s the Dish DVR feature that allows satellite TV subscribers to record automatically all of broadcast primetime and then play it back without the commercials. Recognizing the threat to their principal revenue stream, the broadcast networks have been challenging in court Dish’s right to offer the service.

The new omnibus deal includes a settlement under which Disney drops its suit and Dish agrees to disable its AutoHop ad-stripping feature for three days after a program airs. However, the deal is limited, I am told. It applies only to the ABC O&Os. If affiliates want to block AutoHop in their markets, they are going to have to negotiate for that concession just as Disney did.

A note of caution: If media history tells us anything, it’s that Dish may cheat by stretching the market boundaries of the ABC O&Os and affiliates with which it does make deals. Keep in mind that the wily Charlie Ergen is still running Dish.

If Dish gets its service up and running, I wouldn’t be surprised to learn that it is authorizing subscribers to receive WABC New York in Scranton, Pa., and Hartford, Conn., and ignoring the ABC affiliates in those markets.

I’m not sure what affiliates can do about this other than to make sure that their markets are clearly defined for online purposes and then to be vigilant for distant signals popping up on their turf. The courts are a slow and costly enforcement mechanism. Maybe the networks can help by insisting that Dish honor market boundaries.

Another factor is Aereo. If Aereo prevails in court, Dish could license the technology and use it to pick up affiliates and include them in its service without permission or payment from affiliates. Fortunately, the legal tide seems to be turning against Aereo.

The day when “cable TV” will jump from coax to the Internet and our smartphones is fast approaching. It’s comforting to know that broadcasting will still be a big part of it. How could it not?

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.