After months of negotiation, Disney (
) and Dish Network (
), have reached a long-term programming deal, allowing the
satellite TV operator to carry Disney's networks such as ABC and
ESPN. The deal will also grant Dish over-the-top rights to include
Disney programming in a web based service.
As part of the agreement, Disney will also drop its lawsuit
against Dish over the AutoHop service and Dish will disable AutoHop
feature for ABC programs until three days after the show airs. The
way the entire industry is structured, it appears both the content
owners and pay-TV operators have little choice but a marriage. Both
of them can't survive separately. While there is demand for
content, there is a requirement of distribution of that content. We
have seen in the past that sometimes content owners have an upper
hand in the negotiations, as is evident from the CBS (
) and Time Warner Cable (
) dispute. However, this may not hold true in every situation. For
instance, if Dish decided to drop Disney channels, it would have
benefited on the cost front but at the same time it would have
taken a significant hit on the subscriber count. Similarly, for
Disney, if it was unable to strike a deal with Dish, a possible
blackout would have eroded huge dollars in the form of subscription
and advertising fees. Both the players are dependent on each other
and a marriage eventually is the key for survival, especially for
the popular networks and large pay-TV operators.
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How Does The New Deal Benefit ABC?
Overall, it appears to be a good deal for Disney, especially
over the AutoHop feature of Dish. In addition, Dish has agreed to
Fusion, Disney Junior, ESPN Goal Line, ESPN Buzzer Beater,
and the upcoming
network, expected to launch in August 2014. The satellite
company offers a DVR to its subscribers with a feature that removes
commercials automatically from the recordings on DVR. While this
sounds great for end users, the networks argue that the recording
violates copyrights. The networks first sued Dish in May 2012.
However, they have not been successful to get an injunction to bar
Dish from offering its subscribers the AutoHop feature.
Broadcasters usually mint advertising dollars in first three
days of content delivery and Dish disabling the AutoHop for first
three days ensures Disney's advertising dollars remain intact.
Disney's ABC broadcasting revenues are derived primarily from three
sources - advertising, retransmission consent fees, and TV
production and distribution. The growth in broadcasting largely
depends on the programming being offered on the network. Usually
) takes the lead among broadcasters due to its solid programming,
especially through summer. So far in the 2013-14 broadcast
television season, Comcast's (
) NBC is in first place among adults 18-49 with 19% jump in ratings
from last season.
(FOX) is second with 12% increase in ratings from last season. CBS
was third down 23% in ratings from last season and ABC was fourth
also down 9% from last season.
The overall estimated ABC revenues were $5.87 billion in 2013,
around similar levels seen in 2012. However, we expect these to
improve in coming years due to growth in retransmission consent
fees and higher TV content and distribution revenues. We expect
broadcasting revenues to reach the $7 billion mark by the end of
our forecast period, reflecting an average annual growth rate of a
little under 3%. However, there is a risk that can stall this
growth. ABC's effective ad pricing has not seen much growth in the
past years and if there is any meaningful decline on that front, it
can more than offset the growth at other two drivers. We are eager
to see how 2014 will trend in terms of advertising spending and
also if ABC can boost its ratings. Meanwhile, the new deal between
the content owner and satellite service provider appears to be a
boon for both the companies, especially Disney.
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