Will Dish Network Play Hardball with Disney’s ESPN?

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While the recent Labor Day weekend brought good news to frustrated Time Warner Cable (NYSE:TWC) customers  – the cable giant finally settled its carriage dispute with CBS (NYSE:CBS) – Bloomberg reports that a very similar disagreement is brewing between Disney’s (NYSE:DIS) ESPN network and Dish Network Corp. (NASDAQ:DIS) — a dispute that could potentially thwart the excitement over the new football season.

Disney and Dish are currently looking at a September 30 deadline to negotiate the amount that Dish is required to pay for content as well as whether the satellite TV provider will be able to offer ESPN content through mobile. Both issues are analogous to those that caused Time Warner Cable and CBS to enter their month-long blackout. The current conflict between Disney and Dish could potentially see a fight equally drawn out, considering that ESPN is the most expensive pay-TV channel.

If the results of the Time Warner Cable and CBS debacle are any indication as to how the dispute between Dish and Disney will play out, the cards appear to be stacked in Disney’s favor. CBS ultimately negotiated significant price increases while retaining the digital rights. And while Bloomberg explains that Dish Chairman Charlie Ergen has spoken of holding down costs in recent months and has brought up the idea of dropping ESPN before, that’s not a popular idea for a television channel with viewership that extends far beyond that of die-hard sports fans.

Look no further than a variety of analysts to explain just how important ESPN is to pay-TV providers as alternative entertainment services, like Netflix (NASDAQ:NFLX) or Amazon (NASDAQ:AMZN), gain traction. Todd Juenger, an analyst at Sanford Bernstein & Co., says, “ESPN is among the most powerful subscriber attraction and retention tools distributors have at their disposal.” Matthew Harrigan, an analyst at Wunderlich Securities in Denver, explained in an interview “Even grandmas watch a lot of sports, so it will be difficult for Dish.” He continued, “ESPN and Disney are in a great bargaining position.”

Through all of this, Disney chairman and chief executive officer Bob Iger appears to be in good shape to more or less get what he believes ESPN deserves. CBS Chief Executive Officer Leslie Moonves explained in a Bloomberg interview that the results of the CBS dispute revealed that “If you provide great content, you should get paid for it.” He continued, “The networks will take that and use a similar argument.”

Of course, Ergen is willing to take risks, evident by his dropping of AMC Networks (NYSE:AMC) for three months and dropping Viacom (NASDAQ: VIA) for one week. But Disney’s ESPN is a whole different ballgame entirely, so it wouldn’t be surprising to see Ergen resolve this dispute much quicker than those other ones.

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