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Dish Network’s IPTV Deal With Disney Changes The Game, But It Won’t Break The Cable Bundle

Dish NetworkCharlie Ergen has somehow managed to change the game and keep it the same in one fell swoop.

The Dish Network Chairman sent a few shock waves through the television business yesterday when his company announced a new deal with The Walt Disney Company that allows Dish to distribute Disney networks — including ESPN — “as part of an Internet delivered, IP-based multichannel offering.”

It’s not the first deal of its kind. Sony and Viacom struck a similar deal last August for a proposed PlayStation 4 TV service. Dish, however, is the first to strike a deal with arguably the biggest piece of the pay TV puzzle, and that puts them far ahead of everyone in terms of launching a pure IPTV service with American channels. Dish already has an IPTV service of sorts in the form of DishWorld, an online TV service that has served as Dish’s IPTV test bed for more than a year.

So what does this deal mean for you?

For starters, it means that if you own the Hopper, you will start to lose some functionality.

For the near term, the Dish/Disney deal is a big one because Ergen has agreed to limit a feature on his “AutoHop” DVR, which lets viewers automatically fast-forward past the commercials on ABC’s shows. In exchange, ABC will stop suing him — though other broadcasters, whose programming remains skippable, are still fighting with him.

With Disney on board, Ergen will certainly offer similar deals to other broadcasters — and if enough of them accept, Comcast is effectively painted into a corner.

Consider what John Ourand of Sports Business Journal wrote last week with regard to Comcast’s proposed buyout of Time Warner Cable:

Several sources who regularly deal with Comcast predict that the creation of such a behemoth will cause Comcast executives to be wary of engaging in public battles over channel pricing for fear that regulators will get involved.

That wariness works both ways. Should Dish strike IPTV deals with the likes of Fox, CBS, and Time Warner, then Comcast, which owns NBC Universal, cannot afford to be seen as the last holdout, or else regulators will use it as evidence that Comcast cannot be trusted not to abuse its market position, and thus, it should not be allowed to purchase TWC. Comcast has little choice but to get on board with Dish.

What’s more, Ergen will certainly force Comcast to address whether a Dish-owned IPTV service can be used on Comcast’s Internet service. Comcast is notorious for using data caps on its Internet service, which limits the amount of streaming video its users can watch. A Dish IPTV service allows Ergen to argue that those data caps are anti-competitive, which could also block Comcast’s acquisition of TWC. Comcast might have to address whether IPTV services will be limited by the data caps on its network.

Of course, Comcast can spin the Dish-Disney in their favor by showing how Dish’s IPTV service is proof of competition. Consider that Frontier Communications, which has been buying up land-line services (and improving them) as fast as Verizon and AT&T can shed them, has partnered with Dish Network for years in order to offer a “triple-play” package that includes TV, Internet, and phone service.

At the moment, however, Frontier and Dish cannot offer TV service to apartment dwellers who aren’t allowed to put up satellite dishes. A Dish IPTV service would change that. It would allow companies like Frontier to offer all customers in its service area a true triple-play package. That, in turn, allows Comcast to demonstrate that there is competition for its services. It’s a stretch, of course, and it won’t prevent some concessions, but given Comcast’s lobbying power on Capitol Hill, Comcast could sell that notion to the right people to help the TWC acquisition get approved.

All that aside, though, there’s one important aspect of the Dish-Disney deal that cannot be overlooked — it is designed to keep the cable bundle intact. Dish might be able (finally) to offer its customers access to Watch ESPN, but Disney will not let Dish offer ESPN channels a la carte. Ultimately, a Dish IPTV service will resemble Dish’s current satellite TV service: a large bundle of channels at a set price. That means consumers will still have to pay for channels they don’t want in order to get the channels they do.

In the end, Disney and ESPN come away as huge winners in this deal. They weaken the functionality of the Hopper, they strike a heavy blow against Comcast, and they keep the cable bundle just as is, allowing them to continue to collect money from customers who don’t watch all their channels.

There’s still a lot for consumers to like about this deal. Dish Network customers who are sports fans will celebrate getting Watch ESPN. SEC football fans will be happy to see at least one satellite service offering SEC Network, as DirecTV continues to fight ESPN over that channel. Comcast seems likely to be forced into a number of new regulatory concessions, and regardless, plenty Comcast and TWC customers can begin to look forward to the day they can leave those companies behind for good. Anyone looking to buy sports channels separately from other pay TV channels, however, still have a long wait ahead of them.

 

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