Fox vs DISH: How Broadband Providers Can Break Old Pay TV

on Feb 25, 13 • by Edward Finegold • with No Comments

I was reading the news today about Fox suing distribution partner DISH because its new “Hopper” set-top boxes allow subscribers to stream both live and recorded TV to connected and mobile devices and “instantly skip commercials.” It intrigued me because online and OTT video distribution are...

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I was reading the news today about Fox suing distribution partner DISH because its new “Hopper” set-top boxes allow subscribers to stream both live and recorded TV to connected and mobile devices and “instantly skip commercials.” It intrigued me because online and OTT video distribution are disrupting the status quo in Pay TV. Traditionally happy partners are being pitted against each other. They aren’t yet sure of the best ways to work together to capitalize on changes in consumer viewing behavior. Now that anyone can take content directly to individuals thanks to broadband-connected devices, the Pay TV distribution ecosystem is being upset. Everyone in the game knows they want to own the consumer’s entertainment experience. The question is whether it’s still in their best interests to work together as they always have.

This is yet another bold move from DISH and Founder Charlie Ergen who recently have challenged and bucked the status quo in a few areas. DISH recently won approval from the FCC to use some of its spectrum designated for satellite phone service for cellular services instead. This was a huge coup that played into the FCC’s desire to lessen the spectrum oligopoly that has emerged in the U.S.. It simultaneously increased the value of DISH’s spectrum holdings while giving the satellite TV provider a chance to do something interesting in the mobile market.

DISH has also been innovative with its Pay TV service offerings, like DISHWorld. This is an OTT service that runs through Roku devices. It targets viewers in the US who want to subscribe to International programming packages, have broadband connections, but aren’t necessarily either DISH or any other kind of Pay TV subscriber. It challenges the traditional thinking around how a Pay TV subscriber is defined.

So, for DISH to come out somewhat recklessly and begin offering DVR-based OTT streaming to its subscribers in ways that stretch, if not defy, its licensing deals with major networks isn’t all that surprising. Shoot – Ergen is a multi-billionaire. His spectrum just doubled or tripled in value. What does he really have to lose by shaking things up in the Pay TV business?

For mobile and broadband providers, DISH’s efforts may signal an opportunity. Fox’s actions against DISH suggest that it’s worried about its revenue models if companies like DISH are going to broadcast anywhere they like and let consumers skip the commercials. (Actually, the absence of commercial interruptions is something that makes Netflix so enjoyable…Premiere League matches too (hint, hint, NFL)). The big content owners like Fox, however, still own most of the best and most sought-after content. So, they need to figure out the most profitable way to get it to consumers in this new viewing environment. Broadband providers (mobile and landline) may hold the key.

Not only do broadband providers have the networks that reach consumers directly, they have the monetization infrastructure that big content owners lack (i.e. product catalogs, fulfillment, billing, payments, collections, and customer care). Their potential offer is simple – “co-brand with us as the network partner; offer your services through us directly to consumers on an a la carte or build-your-own-bundle subscription basis; subsidize the data consumption as your cost of freight; and share the advert and e-commerce revenue with us (because we can make it much more personalized and immediate).”

I know, I know – this breaks all the rules and models related to licensing content broadcasting rights and advertising. There’s enormous inertia to overcome to make something like this happen. But if Fox’s and DISH’s actions show us anything, it’s that the old Pay TV model is going to break. Netflix is already resetting consumer expectations with its $8 per month pricing and ad free viewing. The big ticket, mass market, Pay TV package model – where you pay for dozens of channels you never watch – is just, well, old. It’s not where the market is headed. Charlie Ergen knows this, so he’s challenging the old rules and making up new ones as he moves forward.

This is worth watching, because somewhere in here is the key to how Telcos, thanks to their massive investments in broadband and billing, can seize the Pay TV business and leave any lethargic, nay-saying, status-quo keepers (like some traditional MSOs) in the dust. Their billing, product management, and payments infrastructure will play a critical role in their ability to partner very effectively with big content owners.

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Edward Finegold
Ed is now Director, Strategy for NetCracker. Previously, for 15 years he was a reporter, analyst and consultant focused on the OSS/BSS industry and a regular contributor to BillingViews.

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