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Negotiating for both a traditional distributor and an over-the-top service can be both a blessing and a curse, but one that, as linear TV companies expand into alternate programming delivery methods, is becoming increasingly more common.
At satellite provider Dish Network, one of the first traditional MVPDs to launch an OTT service — Sling TV in 2015 — what started out as a novelty (and a way for some content providers to extract higher fees) is evolving into a complementary relationship.
“Five years ago, that was a hard conversation,” Dish Network vice president of programming Andy LeCuyer said of the early days of negotiating both traditional and OTT carriage deals. “We’d go and ask folks if they wanted to be on a product in the OTT space. It was a combination of politely being shown the door or, ‘Sure, if you pay multiples on the economics.’ ”
More likely, Sling TV was quoted a price for programming that was substantially higher than what Dish’s satellite-TV service would pay. But as the industry evolves, with more and more OTT players emerging, that stance is changing.
“We don’t know where the OTT space is going,” LeCuyer said. “There are a lot of entrants. But it certainly helps to have a growing product there, and I think that we have a distinct product advantage in the way our Sling TV product is structured. I think it helps going forward.”
Dish’s 13.3 million satellite-TV customers helped give the Sling TV service an entry point with programmers, but LeCuyer said the company was not interested in merely paying top dollar for networks and passing off those costs to the consumer.
“Some people who have done this, the only way they see that it makes sense is to implement a substantial consumer price increase,” LeCuyer said. “We’ve tried not to go down that path.”
When Sling TV first launched, it offered about 20 channels for $20 per month, a substantial discount to the average programing bundle. Consumers that wanted more could buy additional channels in genre packages like sports, news and entertainment for an extra $5 to $10 per month.
Last year, the service introduced a $25-per-month multistream package that includes some regional sports networks. Its original package was renamed Sling TV Orange. With both services, Sling believes it is addressing both the price-conscious customer as well as one who wants a little extra programming but the same flexibility of service.
Flexibility is Dish’s mantra, and one that has permeated the industry over the past few years. Once an anomaly, skinny bundles have become more commonplace as consumers increasingly push for smaller programming packages at lower prices.
Dish has been one of the biggest advocates for affordability. And as retail video prices have soared into the range of $150 to $200 per month, even programmers are beginning to realize that consumer budgets are reaching their limit.
“Necessity is the mother of invention on that one,” LeCuyer said. “At some time, the party will end, in terms of the endless up-and-to-the-right content costs. It’s debatable where that happens; somewhere in there it breaks.” While some content owners have talked about paring down networks — Viacom has said it will focus on six of its two dozen channels, while Turner and NBCUniversal have hinted they would be better off concentrating on fewer channels — LeCuyer said cutting off networks that don’t attract much in affiliate fees isn’t going to change the game.
Other networks with stronger brands have talked about going direct-to-consumer, which LeCuyer said is likely to grow.
“You’re going to see this continued proliferation of direct-to-consumer offerings, but there is still going to be a value to being an aggregator and a distributor of content,” he said. “But at some point, content owners are going to have to start getting a little more realistic and making some hard choices internally about what their portfolios look like, where they’re investing.
“Having this far-flung portfolio of a couple of dozen networks where you try to earn a license fee, that model is breaking,” LeCuyer added. “You’re seeing the beginning pieces of that.”
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