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Dish-Disney Deal Could Fire Up OTT

Dish Network made waves last week with its landmark carriage pact with The Walt Disney Co., engineering a deal that could open the door for the first virtual over-the-top video service by a major distributor in the U.S.

Most cable operators are privately taking a wait-and-see position regarding the Dish service, which is still in its early planning stages. But last week Time Warner Cable chief operating officer Arthur Minson summed up the cable industry’s bifurcated feelings on the subject of OTT — an intriguing business with a questionable business model.

“I’m not sure it actually is a business if you’re not hanging, frankly, other products or you’re not in it for some other reason,” Minson said at last week’s Morgan Stanley Technology, Media & Telecom conference in San Francisco. But he acknowledged there is a market segment looking for a more narrow service.

With Disney on board — the programming giant agreed to allow Dish to carry five networks (ABC Family, ESPN, ESPN2, Disney Channel and owned-and-operated ABC broadcast stations) on a virtual over-the-top service — OTT gained a huge shot of credibility. Most analysts believe that other programmers will follow Disney’s lead.

In an interview last week, Dish executive vice president and chief commercial officer Dave Shull declined to detail markets, but said he believes there is a large contingent of 20-something and 30-something apartment dwellers attracted to the service.

“These people are in a different stage of life,” Shull said. “The result is they have been less likely to pick up a traditional pay TV model. We think there is a demand there for a package that is delivered over the Internet, doesn’t come with a long-term contract and probably is a somewhat minor package than what we offer today at Dish and what Comcast offers and Time Warner [Cable] and everyone else.”

Shull wouldn’t discuss possible pricing, but some reports suggest Dish could offer a package for between $20 and $30 per month.

While the Disney deal does add some credibility to the OTT model, with just five channels, Dish still has a long way to go. And whatever it paid for the OTT rights for the Disney networks, chances are that cost will go up in subsequent deals. Last week at the Morgan Stanley conference, CBS CEO Les Moonves said he would seek different terms in a Dish carriage deal, which expires at the end of this year.

“It should be an interesting conversation,” Moonves said.

Shull declined comment on Moonves’ remarks, but added that not every network needs to be part of the OTT service.

“Every deal is going to be unique,” Shull said. “Not every deal is going to include this. Some content matters more than others when it comes to what the consumer is looking for in this demographic. I think we’ve learned a lot about what we can and can’t do.”

While Dish could potentially be the first major distributor with an OTT service, it won’t be alone for long. Other providers, including Verizon Communications and AT&T, have expressed plans to offer some kind of over-the-top video offering. Verizon CEO Lowell McAdam said last week he is now in talks with programmers for an online video service.

Dish’s rival, DirecTV, has also toyed with the idea. In December, chairman and CEO Mike White told analysts that the satellite giant — it has 20 million subscribers in the U.S. — was working on an OTT offering and could offer more details in the next 12 months. Last week, DirecTV said it would seek a similar deal with Disney, including over-the-top rights.

Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak said that Dish might have a rough go competing against companies with multiple products. But it may have one additional card up its sleeve — its wireless spectrum.

Dish has quietly been involved in a fixed wireless broadband trial in Corpus Christi, Texas, with Sprint since December, with plans to make a full-blown service available in that market by the middle of this year. Plans are to expand the 4G LTE service to additional markets in the future, which could be bundled with an OTT offering.

TAKEAWAY

Dish Network’s new carriage deal with Disney might set the stage for an over-the-top video service from the satellite-TV provider.

Going Over the Top

Dish Network has secured the rights to five Disney networks for a future over-the-top, Internetdelivered video service. Here’s what it may look like, according to the company and published reports.

Channels: According to reports, about 20 to 30, including ESPN, ESPN2, ABC Family, Disney Channel and ABC broadcast stations.

Monthly Cost: Reports have put the targeted monthly cost at $20 to $30 per month.

Targeted Demographic: Young, apartmentdwelling adults with one TV set, aged 18-34, who have never had or are less likely to have a subscription pay TV service.

What’s With the One TV Set? Dish has said it will offer subscribers a single stream of the service, meaning that if they are watching a show on one device (laptop, tablet, TV or phone), it will not be simultaneously available on another device without a separate subscription.

SOURCE: Company data, published reports