Dish Blames Programming Firms for Delay of Online Service

Dish Network Corp. (DISH) would release an Internet-streaming product that includes live programming if it could convince TV networks that the service makes financial sense, Chief Executive Officer Joseph Clayton said.

“We have the technology -- we’re intimately involved in it -- but the long pole on the tent on this is the programmers,” Clayton said in an interview yesterday.

Dish, the second-largest U.S. satellite-TV provider, has been exploring the idea of offering a separate streaming product, known as an over-the-top service. That would give consumers a way to pay a lower price for a smaller bundle of channels, which they could watch on a computer or mobile device.

The challenge is getting a “critical mass” of companies to give online rights to live shows, Clayton said. Negotiations bog down because programmers aren’t willing to sell Dish the rights for a low enough price to make a service viable, he said.

There’s a market -- especially among younger viewers -- for an alternative to traditional pay-TV services, Clayton said.

“There’s no question there’s a group of consumers, mostly around age 18 to 28, that aren’t going to watch 250 channels of TV, pay $100 a month and watch it on a 60-inch flat-panel display,” he said. “Maybe they’ll spend $20 -- maybe less, maybe a little more -- for a lot less channels and watch them on their iPhone, their tablet and their PC.”

Current Subscribers

Still, it would have to be done in a way that doesn’t cannibalize the current service offered by Englewood, Colorado- based Dish, Clayton said.

Programming companies have similar concerns, said Vijay Jayant, an analyst at ISI Group in New York. If pay-TV customers cancel their service, it would lower the networks’ subscription fees and advertising revenue.

Content companies are also reluctant to unbundle networks for an online service, Jayant said. Programmers typically make cable and satellite providers pay for a certain number of channels if they want access to the most popular stations.

“Programmers want to maximize the value of their copyrighted content,” Jayant said. “The economics are generally unattractive to sell first-run, fresh content to fledgling digital over-the-top platforms.”

The largest providers of content to cable and satellite services include Time Warner Inc. (TWX) and Viacom Inc. (VIAB) Time Warner CEO Jeff Bewkes, speaking in a conference call last month, said over-the-top Internet streaming services, also known as virtual MSOs, don’t “improve the consumer experience.”

Viacom, DirecTV

Viacom, meanwhile, clashed with Dish rival DirecTV (DTV) earlier this year over the terms of their contract. During the negotiations, DirecTV CEO Mike White said his customers would prefer to break up the bundle of channels that Viacom offers, though he didn’t plan to push the company to do that. DirecTV, the largest satellite-TV company, reached an agreement in July after a 10-day blackout of Viacom shows.

Mark Jafar, a Viacom spokesman, declined to comment on an over-the-top service.

Dish already has an Internet-streaming service with live programming in countries outside the U.S. called Dish World. The company also owns the Blockbuster video chain, which it acquired last year, and could add digital movies to a potential streaming service, Clayton said.

“We need to be assured a product will resonate with the buying public,” Clayton said. “I could go out there and put up a channel that just watches the Earth. We have one of those. That’s not going to be compelling enough for people to sign up for an over-the-top service. It’s got to be a combination of entertainment, movies and information.”

Dish shares fell 0.2 percent to $33.07 at the close in New York. The stock has gained 16 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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