D-Day Might Be Coming For Dish, ESPN

ESPN distribution executives may be thinking thank heavens for football. There’s the annual excitement with the prospect of big ratings from the NFL and college games. But this year, the benefit may stretch mightily into the reach realm.

ESPN’s eight-year deal for carriage on Dish Network is set to expire next month. If the two sides like each other, certainly Dish’s behavior indicates the opposite as its engaged ESPN in all kinds of litigation in recent years.



Testimony in a recent federal case indicates the ESPN-Dish agreement lapses on Sept. 30 when all that gridiron interest is percolating. So, the date could offer an impetus for Dish to make a deal and prevent an ESPN blackout in its 14 million-plus homes.

CBS hasn’t had the NFL luxury yet in its fee battle with Time Warner Cable that has brought a blackout in millions of homes. But the number of households affected isn't nearly as many as could be left without ESPN and maybe other Disney programming in the ESPN-Dish fight.

How much is at stake? Billions of dollars. Testimony indicated Dish is paying an average of more than $5 a month per subscriber for ESPN. Under, say, an eight-year deal with an annual increase of 5%, Dish would be paying well over $7 a month per subscriber at the end of the contract. At a 6% rate, it would end up owing just about $8.

(According to testimony, the expiring Dish-ESPN deal cut in 2005 started with Dish paying ESPN $3.26 per subscriber a month, which increased annually at a rate of between 5% and 7%.)

If Dish wants rights to offer customers TV Everywhere access, there would likely be a fee on top. The testimony indicated that under a 2010 deal, Time Warner Cable is paying a fee of 19 cents a month for subscribers to offer online access to customers.

The 2005 Dish-ESPN deal took about a year to hammer out, with considerable effort placed on language protecting Dish from paying a less favorable rate than competitors. In the federal case, Dish alleged ESPN failed to adhere to that so-called most favored nations clause. Dish won a tiny portion of the $152 million it sought.

The most intriguing aspect involving Dish-ESPN, however, could come if other Disney properties are involved, including local ABC stations. Dish and Disney are involved in a legal case (along with other programmers) looking to shut down a Dish functionality that automatically removes commercials from ABC shows.

The two sides could make a deal and agree that the fate of Auto Hop and other functionality in Dish’s Hopper DVR should be settled in the courts. Or, perhaps Disney would use the negotiations to gain some concessions.

Barring some sort of peace not seen in the court room, though, it’s hard to envision a settlement without some public vitriol in advance of a Disney-Dish D-Day. Then again, football has a way of bringing people together.

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