Dish Network, Disney Seek Future-Proof Pact

Dish Network and The Walt Disney Co.’s unusually cordial talks over new carriage agreements have been complicated by a desire to anticipate future technological developments and how they affect rights, chairman Charlie Ergen said after his satellite-TV firm reported better-thanexpected third-quarter results.

Dish added 35,000 net new subscribers in the quarter, a period when analysts expected it to lose 39,000 customers. Due to that and the encouraging news about the Disney talks, shares rose 6% on Nov. 12, to $50.38, and then another 2% on Nov. 13, to $51.52.

Disney’s carriage deal with Dish expired on Sept. 30. Disney networks including ABC, ESPN and such cable stalwarts as ABC Family and Disney Channel have remained available to Dish customers through an open-ended extension agreement.


“I think both sides are trying to look at where the technology is going and what the world might look like in several years,” Ergen explained on the Dish earnings call.

Under a long-term contract, he said, “we don’t want to have to go back to Disney and ask permission to do something, and they don’t want to come to us and ask permission if there’s different forms of distribution for them.”

Disney chairman and CEO Bob Iger had said earlier that negotiations with Dish were moving ahead, but issues involving technology are more complicated than first expected.

“There are still issues to be resolved and they could take some time, but as long as we’re making progress we are perfectly patient to see this thing through and avoid a blackout of our channels,” Iger said on Disney’s Nov. 7 earnings call.

Ergen conceded that Dish’s relationship with Disney had always not been the best, blaming himself for that.

“I’m not interested in a long-term relationship with Disney unless we can make it our best relationship in programming,” he also said. “That’s the way we are approaching it. … And if we can do that, let’s move forward.”

But he said he could also walk away from a deal: “You don’t marry everybody you date. [But] Disney is a very pretty girl.”

Most analysts seemed hopeful a deal could be reached.

“We expect the two to reach agreement without a blackout given the stakes for each and since the negotiations seem to be progressing,” Credit Suisse media analyst Michael Senno wrote in a note to clients last week.

A sticking point in Dish carriage talks has been the existence of the ad-skipping satellite-TV provider’s adskipping AutoHop feature on its Hopper digital video recorder. Disney is one of several programmers that have filed suits in federal court to block the product.

Ergen said it would be nice if Disney dropped its AutoHop suit — as two companies pursuing a “best” relationship shouldn’t be fighting in court — but added that Dish is trying to convince programmers the technology can represent another revenue stream for them through targeted advertising.

“What we really are trying to get broadcasters to think about [is] if people are going to skip commercials, let’s recognize that fact,” Ergen said. “And if you recognize that people are going to skip commercials when they play things back on the DVR, is there a better way for us to go about monetizing that?”

Ergen also shed some light on Dish’s pursuit of wireless spectrum. He said it’s been largely in order to partner with another wireless provider to offer video anytime, anywhere.

Dish has spent about $3 billion on spectrum from DBS North America and TerreStar and has been identified as the stalking-horse bidder for bankrupt LightSquared (with a $2.25 billion initial bid) and its wireless licenses.


Ergen said Dish will participate in the upcoming H-block spectrum auctions in January (which require a minimum bid of $1.56 billion) and is currently awaiting a Federal Communications Commission decision about a waiver that would let Dish convert its AWS-4 licenses to all downlink.

“You can imagine any number of scenarios on the video side where you might partner with one or more than one of the current providers going forward,” Ergen said.

Regarding over-the-top services, Ergen said that Dish is only interested in ventures that enhance its existing business. “We’re not trying to drive OTT,” he said, and Dish’s forays in that direction have been largely defensive.

“You’ve kind of got a couple of options,” Ergen said. “You can lead the way, which means you get to set the rules. Or you can be a close follower, which means you’re going to accept somebody else’s rules. Or you can be a slow follower and suffer the consequences of that.”


Satellite provider Dish Network and Disney are talking nice over a new carriage deal, but future technology remains a thorny issue.