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Dish Plans to Charge Internet TV Subs Extra for Live Local Broadcast Channels: Sources

Dish Network, which is assembling one of the first Internet-delivered pay-TV services in the U.S., is planning to offer local broadcast TV networks to subscribers of the over-the-top service as a separate, premium-priced tier, according to industry sources.

But it’s not certain whether the No. 2 satcaster will be able to secure agreements with many broadcasters to be able to bring such an offering to market, as they would expect to be included in any basic pay-TV bundle. “Good luck with that,” said a senior broadcast exec.

A Dish rep declined to comment.

So far, Dish has inked deals with Disney, covering linear and video-on-demand content from ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN and ESPN2, along with cable nets from A+E Networks and Scripps Networks Interactive.

Dish chairman Charlie Ergen has said he anticipates the company will launch the Internet TV service this year. The OTT bundle is expected to be $20-$30 monthly, although Dish has not outlined specific pricing or packages offerings.

The satellite TV operator has rights to distribute live and on-demand content from ABC, including the Alphabet’s eight owned-and-operated local TV stations. But those ABC stations — as well as other local TV channels — may not be included in the baseline price of Dish’s OTT services.

Dish wants to “offload” retransmission fees for local TV, according to one top media exec. “Their approach is going to be, ‘If you need over-the-air (broadcast TV), great, we’ll sell it to you; if not, you can use an antenna,'” the exec said.

At this point, the satscater has not reached deals with CBS, NBC or Fox. Meanwhile, Dish has other challenges in its move to go over the top: Per its Disney deal for ESPN, ABC and the other nets, it’s limited to a single video stream per household, while the A+E and Scripps pacts allow for multistream access.

The FCC is now drafting rules that would let online video providers that deliver linear TV be treated like traditional cable and satellite services with respect to program-access rights. That could in theory allow Dish to pay for broadcast TV channels, under the FCC’s retransmission-consent rules, for inclusion in the OTT service. But the new FCC rules, even if approved, wouldn’t be enacted before the satellite company’s expected initial launch date.

Skeptics have questioned how appealing a “virtual pay-TV” service will be from Dish or others expecting to launch OTT pay-TV services like Sony and Verizon Wireless. Absent local broadcast channels, it’s even less likely consumers will bite.

And even Ergen — who is said to be passionate about launching the Internet TV service, having pursued the concept for at least three years — has conceded the strategy might not pay off.

“We think OTT is a good, smart move,” Ergen told investors on Dish’s second-quarter 2014 call. “But we’re not absolutely positive.”

Whatever happens, don’t expect the pay-TV status quo to change overnight. But between the twin trends of cord-cutting and OTT services, something will have to give.

Cable and satellite TV ops are facing “a death by a thousand cuts,” said Craig Moffett, senior analyst at MoffettNathanson. “No single virtual MSO will likely dramatically change the equation. But collectively, they could start to have a material effect on the subscriber numbers.”

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