Friday, September 28, 2012

Dish Network Becoming An IPTV Distributor?

Dish Network may be feeling a bit stifled being a satellite cable provider.  With a world turning quickly to the web, Dish seems ready to build out its own web distribution platform of cable networks to bundle to consumers.  Among those networks that Dish is negotiating with include Viacom's channels, MTV, VH1, and others, Scripps Networks, with Food and HGTV, and Univision.  "The companies would offer an online product known as an over-the-top service, charging a lower price for a smaller bundle of channels viewable on a computer or tablet. Dish Network Corp’s service would change the dynamics of the pay-television business, breaking up the bundles that force customers to pay for channels they don’t watch. Dish’s service would change the dynamics of the pay- television business, breaking up the bundles that force customers to pay for channels they don’t watch."  For those with specific viewing interests, a smaller bundle could prove economically preferable to a large number of consumers.

Certainly, the challenge for the cable programmer is the fee that they receive under this service.  As a sub leaves a cable operator for this new service, the network loses that revenue from the left hand only to get it back in the right.  The equation works when the switch provides an incremental increase in a per sub rate; it does not, if the sub fee switch leads to a lower amount.  As license fees vary by operator for a cable service, it may be win with a major cable operator like Comcast, but a loss against an independent cable operator.

As a business, it seems a win for Dish who can expand its reach to multiple web accessing devices and expand beyond a satellite business.  It may also help drive their sales of their Blockbuster streaming service. At the same time, it will open the eyes of the major cable operators to also build their own versions of an IPTV business.  At that point, it could drive competition among cable operators.  Where once they were separated by the communities their franchise license served; a web based service lacks any geographic boundary.  Cable programming services could be offered by Comcast in a Time Warner market and vice versa.  In essence, Dish may just be opening a Pandora's Box.

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