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Summary:

Dish may only have one broadcaster on board for its planned internet TV service, but the deal nonetheless represents a big step for the TV industry, and for people sick of paying for expensive bundles.

Things are about to change in the TV industry, and Dish wants to be on the winning side of those changes — even if that means catering to people who don’t want to pay $100 for an expensive TV bundle.

The satellite TV operator announced a far-reaching content deal with Disney late Monday that not only continues to provide the satellite TV operator with the necessary rights to carry Disney networks like ABC and ESPN, but also includes rights to use the same networks for an internet-based pay TV service. It’s the first time that a major broadcaster has signed a deal for any such offering in the U.S.

A number of companies have tried for some time to launch internet-based TV services. These efforts include Intel’s Intel Media unit, which tried to get a service dubbed OnCue off the grounds by the end of last year, but failed to do so, with Intel eventually selling of the OnCue assets to Verizon, which now wants to offer a similar service to broadband and wireless subscribers. Sony is another contender; following months of rumors, the company announced at CES that it plans to launch an internet-based TV service, with tests scheduled to begin some time this year.

As far as we know, neither Sony nor OnCue have signed agreements like the one secured by Dish this week. Intel Media was apparently close to sealing the deal with at least some of the big broadcasters, but the sale to Verizon, which itself took much longer than people with knowledge of the negotiations expected, slowed down content negotiations.

So how did Dish leapfrog OnCue, Sony and probably a handful of other companies that have at one point or another looked into launching an internet-based TV service?

Carrots are nice, but it’s always good to have a stick, too

Dish was directly threatening the broadcasters’ ad business when it introduced the auto hop feature of its Hopper DVR two years ago, and it did so with calculated precision: Auto hop allows consumers to watch their favorite shows without any advertising by automatically skipping over those annoying ad breaks. However, this only works for shows of the four major broadcasters, and only during prime time. It’s just potent enough to make it hurt, but not far-reaching enough for consumers to always rely on it.

As part of the agreement with Disney, Dish will disable auto hop for shows running on the company’s networks for the first three days after an episode airs, which is the time that matters to advertisers trying to reach an audience. The partnership also includes some additional commitments on future ad technologies, which could eventually allow Disney to swap out broadcast ads with more targeted and personalized advertising, possibly even after that three-day window.

It’s likely that Dish will try to strike a similar deal with the other major broadcasters, and the possibility to further monetize content that’s otherwise worthless could be just the incentive that networks need to join the satellite operator — especially since the legal fight against Dish’s ad skipping has been a dud.

That doesn’t mean that forging these contracts will be easy, especially because Dish would need everyone to come on board before it can actually launch a meaningful offering. It will also be a challenge for Dish to find that sweet spot that could make its internet service a success for cord cutters and other customers unwilling to pay $80 to $100 per month for cable or satellite TV. Bloomberg reported Tuesday that Dish was trying to offer its internet service for $20 to $30 per month, which sounds like a good proposition for many cord cutters. But getting both pricing and content line-up right will be challenging.

But what Dish has done with the Disney deal is that it has shown a way forward for many of the issues that plague the industry today: Broadcasters and pay TV operators have long fought over retransmission fees, which have proven to be a roadblock for new technologies. By not only settling their retrans fight, but also using it to address internet TV and addressable advertising, Dish and Disney have show that there are ways forward.

That’s a big step towards making internet-based TV services a reality. Now it’s time for Verizon and Sony to follow up with news of their own.

Image courtesy of Flickr user angelrravelor.

  1. It looks more like a shot across the bow of the cable / telco guys who sell internet and cable tv. Why not make a deal with the satellite guys?

    Maybe (this programmer) knows they will have to go to the Netflix-style sooner or later – and it’s better to be on the leading edge as opposed to the trailing edge. – to set the terms of engagement before others do.

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  2. Networks are shooting themselves in the foot. I Tivo most things and can FF through commercials painlessly anyway. When watching on the networks’ internet sites, I can’t FF past their commercials, so one would think this is where they would prefer I watch. But now ABC has disabled viewing their shows online (same with ABC Family) unless logging in as a customer of one of their partner providers. DTV isn’t one of them, so I can’t watch anything I either didn’t Tivo or which lost a conflict with a higher ranked show and was bumped by another recording. So I quit watching their series altogether. If I can’t catch up on one episode I missed, I’m not going to pay them or someone else specifically when their advertisers can easily pay for their services through views, as it has been for decades. They may want to change the model, but I’m not playing, and I suspect they’re losing audience more than they know. I’ve already kicked a few of their series to the curb over missing an episode I can’t watch online. I certainly won’t start any new shows with this in mind.

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    1. I agree Dan, they have a very sort sided view when the networks start trying to lock up everything behind the pay wall. Content is everywhere now, I don’t miss that one network or that 1 show…

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    2. Right now I use Hulu Plus, but the increase in commercials without an option to pay more for their elimination has made me seriously consider some sort of DVR solution. The problem with that is I really do like the “Top Clips” feature of Hulu Plus, where the most interesting things often come to the surface. With a DVR, I’d have to specifically watch every show, instead of simply clicking the latest Jon Stewart interview or Jimmy Fallon music number.

      Another issue is that I don’t always know what I want to try ahead of time. You’d think the networks would want me to catch up on their shows, but when I heard The Blacklist was a good show, Hulu Plus only offered the 5 most recent episodes, so no go. I have zero interest in testing pilots for the networks, I’d rather wait until “the mob” has decided the best shows and then binge watch to catch up. That seems like a perfectly rational response for someone with limited time and many options. But the networks don’t seem keen on that. Conversely, this strategy allowed me to catch up on Golden Globe winner Brooklyn Nine-Nine, which while certainly not amazing, still has it’s moments.

      At the end of the day, I don’t think many people are following your path. Setting up an antenna DVR requires forethought and risk management. It’s much easier to simply pay the cable company, or Hulu, for the ability to watch shows. I’ve pointed out to Hulu that no person would be willing to watch 5 hours of commercials (the average a month on Hulu) in exchange for saving $10, but they don’t seem to think that way. Maybe they’ll come around eventually.

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      1. If you use a “computer” to watch Hulu:

        1. Refresh when a commercial comes on (you will get a shorter commercial).
        2. Watch 2 shows side-by-side Mute during commericals and pause when commercials end. Switch and go.

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  3. Puhhlesee, getting in bed with Disney and becoming their bitch and going against ala carte offering is guaranteeing I never do business with them in the future!

    Dish used to be on the forefront, but now they are just a little less heinous than everyone else. Listen up content

    I want what I want at the price I want delivered HOW I WANT! I am the consumer, listen up punk!

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  4. As a Dish customer who consumes zero content from any of these Disney properties and doesn’t need or want them, I hope it doesn’t end up increasing my bill somehow. Ergen is normally pretty good about this but this is a new territory.

    My Dish bill recently ended it’s first-year discounts so I am now seeing the full price for everything for the first time, and it’s not fun. Just like Ergen and company reevaluate their deals with the networks, I will be doing the same thing in a few months. Fair is fair.

    I have zero confidence in whatever internet service Dish is talking about, since they currently have no internet service of their own. Sure, they have the satellite dish internet service -which they advertise constantly, but that is not a solution that will work for masses of people. Heck, it cannot serve masses of people anyway: they have a subscriber limit in place per geographic area. Too many subs in one area means tough luck. So at best, Dishnet is a niche service when you can’t get anything else. So how does it make sense to pitch it as some sort of generic universal offering? Not seeing how that is supposed to work.

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  5. Would any Internet based cable network be priced any better then the current offerings. I doubt it.

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  6. I think you might want to reword this to add in “TV” – “Internet TV Service”, as it is now it sounds like DISH is planning on offering Internet Service for $20-$30 a month, which would truly be ground breaking… ;-) Thanks for the great write up!

    This is the original quote: “Bloomberg reported Tuesday that Dish was trying to offer its internet service for $20 to $30 per month, which sounds like a good proposition for many cord cutters.”

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  7. oh yeah the cord cutters are GOING TO LINE UP for a pay service of Disney streams !!!! bwahahahahahahahaha

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  8. colleenkturnbull Wednesday, March 5, 2014

    You will want to quit your job tomorrow when you try this system and start getting paid online $7362 in 1 month. Go now ᵂᵂᵂ.fiscalpen.ᶜₒᴹ
    ……..

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  9. I’ve wondered for awhile why the satellite companies aren’t at the forefront of the IPTV movement. They seem perfectly positioned to offer an OTT option for their subscribers, since they have no geographic restrictions. Why not offer one price that includes satellite and OTT? I’ve looked at what Dish offers, and while it seems better than TWC (whom offers very little bundling incentives compared to Comcast or Verizon, something sure to disappear after the buyout), until I can easily play it on my Roku, Chromecast, tablet, or smartphone I’m simply not interested. The proprietary STB ship sailed a while ago. Give me some freedom.

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  10. The simple truth is this.

    1. Families that watch Disney are the least likely of cord cutters. They use TV to entertain themselves inexpensively while keeping the kids quiet. Dish wants them because they’ll pay a lot to keep the kids quiet for a few hours at a time.

    2. If cable is unbundled there will be far fewer ‘good’ shows on any one system because the risk of ‘development’ is actually being borne by unwitting (or unwilling) cable subscribers now.

    3. The mass media advertising model is broken. But that doesn’t stop media buyers and TV execs from glueing it together each time it gets a crack in it.

    4. On-demand viewing – in every sense of the word – is a big part of the future but it challenges the mass media advertising model, which means it will be a longer time coming.

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