New technology can sometimes make old ideas seem sexier than they really are.
Take satellite broadcaster Dish Network. Earlier Thursday, Bloomberg reported that Dish wants to offer a no-frills package of programming to consumers via the Internet. In industry jargon, this is what’s known as going over-the-top or OTT. It’s one of those hot buzz words right now.
But in reality, what Dish is proposing is nothing new. Time Warner Cable has had a low-budget offering of cable channels called “TV Essentials” for the last few years. It has not really caught on, perhaps because one person’s essential is another one’s luxury and vice versa. Time Warner Cable’s package does not include ESPN for example, which makes it a non-starter for a lot of people.
Bloomberg says Dish’s initiative could change the way programming is sold to consumers and eliminate bundling. That is wishful thinking. Bundling is how the cable industry makes its money and there is little interest in doing anything that would damage it.
In a nutshell, bundling is when a programmer sells all of its networks to a pay-television distributor such as Dish or Time Warner Cable in a package as opposed to selling them on an individual basis. Viacom, for example, prefers to sell a package that includes its popular channels such as Comedy Central and Nickelodeon along with its less popular networks such as Spike or VH1. Walt Disney Co.'s ESPN does the same with its sister channels such as ESPN2 or ESPN Classic.
Programmers will sell individual channels to distributors but that is typically a far more expensive proposition than the bundle.
Dish has been pitching this service for about a year and so far no one has jumped on board. Viacom, as Bloomberg reported, has had talks but nothing serious. Viacom is not opposed to participating in such an offering but it, like other programmers, won’t do anything that would really hurt its bundle.
And that’s the rub. Even the programmers participating in such low-budget offerings have clauses in their contracts having to do with the amount of subscribers for such a service. If the subscriber numbers go above a certain threshold, the programmers can renegotiate with the distributor.
According to one programming executive who heard Dish’s pitch, the satellite service does not think this is a big business and anticipates getting only 1 or 2 million people to sign up if it gets off the ground.
Dish is going to have a big problem getting some programmers to even come to the table to talk about its OTT initiative. Dish is in legal battles with CBS, AMC, Comcast (parent of NBC, USA, Bravo, MSNBC, CNBC and other channels), Walt Disney Co. (ESPN, Disney Channel) and News Corp. (FX, Fox News). It is highly unlikely that those companies will have any interest in working with Dish on this until those fights are resolved.
None of this is to say that OTT won’t emerge as distribution business. But having another method to deliver content and finding a way to change the business model of the media industry are two different things.
Follow Joe Flint on Twitter @JBFlint