Here’s Why Dish Network is as DUMB as Congress
Television networks make money in only 2 ways: subscription fees and advertising. Advertising is when a third-party subsidizes our cost for the programs we love. Instead of paying $10 a month to watch only The Office, Staples and other advertisers pick up the bill in exchange for us watching their ads.
Now, Dish Network (NASDAQ:DISH) thinks they can allow viewers to “Auto-Hop” over the ads advertisers are paying for us to see in exchange for cheaper/free television shows. Hmmmm. Someone at Dish is dosing some major hallucinogenic drugs because although viewers say they may want to skip over commercials, viewer ignorance doesn’t rule the business model. In other words, viewers say they don’t want commercials, but they sure as hell don’t want to pay two to ten times more to watch the same programs.
Dish is supposed to be the adult in the room and educate their subscribers about this grave reality. Instead, they are acting like the U.S. Congress who tells voters they can have their government programs and low taxes too. We’ve seen what a disaster that creates.
As any sane business person would imagine, the content producers are going to sue Dish Network into oblivion. Fox (NASDAQ:NWS), NBC (NASDAQ:CMCSA) and CBS (NYSE:CBS) are already dropping legal bombs. You can expect Discovery Communications (NASDAQ:DISCA) and Disney (NYSE:DIS) to follow suit.
The content producers are claiming copyright and licensing violations — and rightfully so. The advertisements are an inherent part of the content delivered to the viewers when advertisers paid for the viewer to receive the show. Although the justice system can be illogical, this case seems extremely simple to decide based on the economics of the television industry.
Regardless of whether Dish wins or loses this case, they’ve already lost. At the end of the day, if some judge gets this case wrong, the content producers will band together and disallow their content to travel to Dish customers. There is no way the FCC will force media companies to give their content away for free when advertisers stop paying for ads everyone skips. Or, the content producers will simply force Dish to pay for the cost of unsubsidized content. That will force Dish out of business unless their subscribers want to pay nose-bleed costs for their television programming compared to neighbors and friends who are happy to keep commercials in exchange for much cheaper television.
Good luck, Dish Network. You have successfully proven even some companies in the private sector are as clueless as Congress.
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