Walt Disney reached an agreement with Dish Network on Monday, to end carriage fee disputes that started in September of last year. Among other things, the deal allows Dish to provide Disney's over-the-top services like WatchESPN outside of the typical TV subscription model. In other words, you don't need a satellite installed in order to get ESPN.
The deal opens the door for further progress in true Internet-delivered television. Verizon and Comcast have been steadily making progress toward such a service, but content deals are the biggest roadblock. With this deal between Disney and Dish, we might soon see true IPTV become a reality.
Concessions on both sides
Prior to its deal with Dish, Disney required a pay-TV subscription to gain access to its suite of Watch-apps. It was, however, selective about who it offered the service to, using it as a bargaining chip to drive up carriage fees at the largest carriers. With over 14 million subscribers, Dish certainly qualifies as a large carrier, but has attracted the ire of content owners with its Hopper DVR box.
The Hopper allows subscribers to skip commercials for Primetime television broadcasts on the major networks. With the new deal with Disney, Dish will disable that feature for the first three days after broadcast.
The three days is not arbitrary. It's the period where advertisers will still pay for commercials viewed from recordings. As a result, Disney should see additional revenue from DISH subscribers with, likely, a moderate rise in carriage fees.
It's uncertain how Dish subscribers will react -- the Hopper is one of the service's differentiating factors. The new live and on-demand streaming capabilities may quell the backlash, however.
Opening the door
This is the first time Disney has offered the ability to sell its over-the-top streaming services without a bundled cable subscription. Unfortunately, we're still a long way from a la carte ESPN. The details of the agreement state Dish can offer the over-the-top services "as part of an Internet delivered, IP-based multichannel offering."
Still, this is an early step in securing the rights for such a multichannel IPTV service. Intel tried to develop an IPTV service last year, and unable to secure content rights ended up selling the division to Verizon. Verizon, with its established relationships with content owners through its FiOS TV service, is a much better fit for the service.
Comcast, too, has taken steps to deliver television through the Internet. Its X1 platform includes a cloud-based DVR, which allows for remote storage and delivery, and on-Demand streaming, but its original television signal is still delivered through cable tubes.
IPTV could free up bandwidth, saving cable companies the expenditure of increasing bandwidth with the increased adoption of HD and 4k data streams. Instead of sending every stream through the cable pipe at the same time, IPTV allows for a switch mechanism that lets the cable companies send only the data the user demands at that moment.
Moreover, a stand-alone Internet-delivered service could stave off people ditching cable for over-the-top services like Hulu and Netflix. It's a good defensive move to provide better access to content across all Internet connected devices.
Content is king
Content owners are the biggest thing standing in the way of a complete overhaul of the cable industry. The technology is there and the economics are viable for most of the biggest cable companies. Content owners are hesitant to change their profitable arrangements with cable companies though. Securing rights has been difficult in the past.
Disney's agreement with Dish Network is mostly about ending a carriage fee dispute, preventing a blackout, and ending litigation regarding the Hopper. But the concession by Disney to allow for stand-alone streaming is a big step toward Internet-delivered television.
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The article The Walt Disney Company Wants to Help You Cut the Cord originally appeared on Fool.com.Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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