×

Disney Deal Gives Dish the Rights for a Virtual-MSO Foray

But making that pay-TV workaround a reality won't be easy

Dish Network has taken a small step toward delivering the first mainstream broadband-based subscription TV service in the U.S., closing a deal with Disney last week that gives the satcaster unprecedented over-the-top streaming rights to five cable networks.

But the road to a so-called “virtual MSO” is rough, to say the least.

Dish isn’t providing details about what such an over-the-top TV service might look like, when it might launch, or how much it might cost consumers (although execs apparently told Bloomberg it’s looking at $20-$30 per month). DirecTV is seeking a similar deal with Disney. But as attractive as such a venture may appear on paper, either company would face multiple hurdles in trying to bring it to fruition.

With the Disney deal, Dish has secured linear and VOD content from ABC-owned broadcast stations, ABC Family, Disney Channel, ESPN and ESPN2 as part of an Internet-delivered multichannel offering. That content could be part of a lower-cost service aimed at consumers fed up with regular cable or satellite TV.

But programmers like Disney are purposely trying to avoid arming over-the-top providers with rights to all of its channels, which would risk siphoning people from traditional services.

Popular on Variety

Any virtual MSO service is “almost certainly going to be lighter,” said analyst Colin Dixon of research firm nScreen Media. “You force the consumer to decide, ‘What channels do I watch, and will it be worth switching?’ ”

Furthermore, Dish’s rights from Disney are limited to a single stream per Internet-connected device at once. Right off the bat, that will make the service unappealing to most American households, which on average have more than one TV (not to mention multiple video-capable devices). The intent of that limitation “is to make this service an ‘on-ramp’ to pay TV for cord-nevers, as opposed to an ‘off-ramp’ from the pay TV bundle for cord-cutters,” Bernstein Research analyst Todd Juenger wrote in a research note.

Only 5 million homes have broadband and no pay TV subscription, according to Nielsen estimates. Given the small number of prospective customers for a live Internet television, Dish or anyone else would pay Disney more per subscriber than existing pay TV services for the same channels (unless, that is, the one-stream limit means Dish gets a discount).

Yes, an Internet-delivered TV service has cheaper subscriber-acquisition costs: There would be no need for a service call to deliver equipment, and potentially no set-top box. However, there are bandwidth costs; Netflix has just agreed to pay to interconnect with Comcast to ensure it has enough capacity to reach subscribers over the cable operator’s network.

Despite the headwinds, Dish is looking to carve out new areas of growth because its traditional TV business has flatlined, at around 14 million customers. The industry at large is leveling off, too.

Others see the pay TV biz as ripe for shakeup. But no one has made that leap.

Verizon in January acquired Intel’s OnCue division for about $200 million, after the chipmaker decided that getting into the pay TV biz was too expensive. Meanwhile, Sony announced at the 2014  CES that it plans to test an Internet-delivered TV service sometime this year.

It’s no secret Dish has been contemplating a lower-cost Internet TV service for years; founder Charlie Ergen has discussed the virtual MSO concept on several occasions. As he lamented via Dish’s earnings call last month, “We’re losing a whole generation of individuals who aren’t going to buy into (the MSO) model because they only want one particular show or they want to watch the show wherever they can or they want to watch it on their schedule, and so that generation is not signing up to satellite or cable or phone video today.”

More Digital

  • Onward Animated Film 2020

    ‘Onward’ Tops Studios’ TV Ad Spending

    In this week’s edition of the Variety Movie Commercial Tracker, powered by the always-on TV ad measurement and attribution company iSpot.tv, Disney Pixar claims the top spot in spending with “Onward.” Ads placed for the animated film had an estimated media value of $4.99 million through Sunday for 784 national ad airings on 35 networks. [...]

  • Cash and Maverick Baker

    TikTok Stars Cash and Maverick Baker Sign With Shots Studios

    Cash and Maverick Baker, teen-brother digital influencers and musicians with big followings on the TikTok short-video social app, have signed with management company Shots Studios, whose talent roster also includes Lele Pons. Born and raised in Henryetta, Okla., the Baker brothers run a joint TikTok account (with 7 million followers) where they post comedy, lip-sync [...]

  • Redbox Free Live TV

    Why Redbox Is Moving Into Free, Ad-Supported Streaming Video

    Redbox, best known for its network of fire-engine-red DVD-rental kiosks, has thrown its hat into the free-TV ring — with an ad-supported service that looks a lot like ViacomCBS’s Pluto TV. The company’s Redbox Free Live TV service, which soft-launched earlier this month, is now available nationwide as of Tuesday (Feb. 18). Like Pluto TV’s [...]

  • Erika North

    Erika North Joins Amazon Studios in Asia (EXCLUSIVE)

    Seasoned Asian TV production executive, Erika North has joined Amazon as head of Asia-Pacific Originals at Amazon Studios. North’s LinkedIn profile was updated to show her new status since February. North did not respond to  enquiries, but an Amazon source with knowledge of the situation told Variety that she took up the role from Tuesday. [...]

  • HQ Trivia

    HQ Trivia Lives? CEO Claims He's Found Potential Buyer for Live Game-Show App

    Hold the phone, HQties — there might be a second act for HQ Trivia. The once-buzzy live game-show app, whose audience had declined after peaking two years ago, shut down last week after the company ran out of money and a deal to sell it fell through. Now Rus Yusupov, CEO of parent company Intermedia [...]

  • Dolan Twins

    Dolan Twins to Launch Their First Podcast (EXCLUSIVE)

    The Dolan Twins, sibling digital influencers who have a combined following of more than 50 million across internet platforms, are set to launch their first podcast: “Deeper With The Dolan Twins.” The new weekly podcast from 20-year-old Ethan and Grayson Dolan is being produced under an exclusive pact with Cadence13, a division of Entercom Communications’ [...]

  • Justin Bieber Changes album cover

    Following Lil Nas X, Justin Bieber Track Is Latest to Highlight Online Marketplace

    A shout-out on social media from Justin Bieber has brought some additional shine to Splice Sounds, the popular platform for rights-cleared sounds and beats. The track “Running Over,” from Bieber’s album “Changes” and featuring Lil Dicky, was produced by The Audibles and is based on a loop created by British artist Laxcity and uploaded to Splice. [...]

More From Our Brands

Access exclusive content