Dish-Disney Carriage Deal Seen as Meaning Little for Future of Bundled Cable Packages, Observers Say

The deal doesn’t change very much, at least without understanding how the agreement will be rolled out, said Howard Homonoff, a former attorney with NBC’s cable networks who now consults for media incumbents and new entrants. “The announcement references that Dish has licensed the right to unspecified Disney networks and programs for this undefined service at this point,” he said, referring to terms that include Dish customers accessing Disney content on connected devices (CD March 5 p20). Through the service, “we don’t know if there will be live networks or full networks available or specific programs that are live,” he said. The package for the consumer is unknown, he said. To have a viable service, Dish would need content from other content companies like A&E, Discovery Communications, 21st Century Fox and Viacom, Homonoff said. “When you begin to bring all of those companies and their content into the mix, it’s not clear to me that this over-the-top service will really be providing something that is different from the existing bundles."

The deal broke new ground in some respects, but “it did not break new ground on unbundling or a la carte,” said David Wittenstein, communications and content company attorney at the Cooley law firm. What Dish customers will be offered over the top “will likely look like the same kind of bundled package you would get as a cable customer,” he said. In the multichannel video programming distributor industry, operators have been pushing for multiplatform convenience and the ability to allow customers to watch programming on any number of devices for a while, he said. “This seems to be the furthest extension of that. ... It seems to suggest that there will be a fairly robust multiplatform Internet offering for Dish customers.”

MVPDs want to offer “as robust a video package as possible,” both inside and outside the home, said Wittenstein. “That’s really only in its nascent stages.” The more of these deals that MVPDs can strike, the more that watching cable programming “can be untethered from a cable that comes into your home and can be where you happen to be with whatever device you happen to have with you,” he said. The industry seems to be evolving in that direction, he said.

A deal involving OTT capabilities provides further proof “that the marketplace is working and there is no urgency for lawmakers and policymakers to step in and influence market-driven negotiations related to content,” said a TVFreedom.org spokesman. Broadband technology is creating new opportunities for consumers, and TV broadcasters and content makers are helping facilitate those opportunities “whether through traditional over-the-air broadcast-TV, a pay-TV subscription or via the high-speed Internet,” he said. The coalition was recently started to represent broadcasters including the affiliate groups of the Big-Four broadcast-TV networks, the Mobile 500 Alliance for mobile DTV and companies including Entravision and Journal Broadcast Group (http://bit.ly/1gynctD).

There may be a temporary disruption to the bundling model, but not a long-term effect, said Jeffrey Prince, associate professor of technology and telecom at Indiana University’s Kelley School of Business. It’s very hard to unbundle channels under the current model due to staggered long-term contracts and most-favored-nation clauses, he said. “It’s very difficult for them to offer anything a la carte in the traditional model.” The Dish and Disney deal presents an opportunity “because it’s a different technology that they're transmitting over,” he said.

Dish can offer streaming content on its own from Disney channels, and can likely pull that off because it’s “not required to include other major conglomerates’ channels in the deal,” Prince said. “I'm not convinced that the economics have changed enough that we'll be seeing individual channel owners offering their [own] bundle of channels and that’s it.” There are forces that compel programmers to offer the channels in a package, he added. “If someone’s watching TV, you want to be in their choice set so that they might flip over to see one of your channels."

"We'll have to see how these new business deals disrupt the marketplace going forward on retransmission consent,” the TVFreedom.org spokesman said. Recent deals validate that agreements can be reached in the market “regarding all kinds of programming for the benefit of consumers on various platforms without government intervention,” he said.

The deal renewed chatter that national OTT entry may well happen, said Guggenheim Partners analyst Paul Gallant in a research note. But he said he doubts OTT will lead to channel unbundling. “Content companies don’t want that and they can control the channel packages offered by pay TV providers,” he said in an email. “There might be a slimmed down OTT product for cord-nevers at some point, but I suspect it won’t be replicated by established distributors.”

Unknown is how the Dish-Disney deal will be priced to the public, said Homonoff. “Is this a thin layer of content that will be $10 a month, or on-demand content that will look sort of like Netflix or Hulu?” Players in the market and regulators will end up reacting very differently depending on what happens, “but we just don’t know what it will look like yet,” he said. To promote OTT entry, the FCC could tighten net neutrality rules, expand program access rules or scrutinize cable’s broadband pricing plans, Gallant said.