Mar 5 2014, 1:24pm CST | by Forbes
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.
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 carry Fusion, Disney Junior, ESPN Goal Line, ESPN Buzzer Beater, Longhorn and the upcoming SEC 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 CBS 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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Source: Forbes Auto
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