Who Cares About ESPN: Will Dish Snub Disney?


Television junkies, beware: Another pay-TV and satellite television channel contract is up for negotiation, and if we’ve learned anything from the notorious CBS (NYSE:CBS)-Time Warner (NYSE:TWC) showdown, it’s that this bargaining might not be all that pretty.

According to The Wall Street Journal, ESPN’s eight-year contract with Dish Network (NASDAQ:DISH) is due to expire at the end of the month. This deadline is a major deal for the two companies because they both recently attracted a significant amount of media attention as they sparred over the rising cost of sports programming, contractual agreements, and Dish’s “Hopper” digital video recorder that allows ad-skipping and automatic recording.

The question of a renewed contract is still up in the air, and now consumers and investors are waiting to see whether the two companies can come to an agreement or if their partnership will be severed.

The high cost of sports has long been an issue that Dish Chairman Charlie Ergen has vocally addressed. Walt Disney Co.’s (NYSE:DIS) ESPN is the most expensive of the national sports channels, and it also offers its channels as a packaged deal, which has frustrated Dish and instigated contractual disputes.

Though the pay-TV operator has yet to officially threaten Disney with a contract cut, it has expressed its willingness to drop Disney’s channels if need be, with Ergen maintaining, “We’re prepared to go either way.”

Now, it all comes down to the issue of broadcast fees and sports costs that Time Warner and CBS also battled over. While Dish no longer wants to stomach the ever-rising costs of sports programming, ESPN argues that its channels help the pay-TV provider retain its customer base while Netflix (NASDAQ:NFLX) and other online outlets continue to offer more competition.

But according to The Wall Street Journal, Dish challenges that argument by explaining that its ESPN programming charges account for more than 40 percent of its cost but add up to less than 20 percent of its viewing minutes. Therefore, Ergen believes Dish could potentially drop ESPN with insignificant backlash in the long run. But analysts like Barton Crockett disagree, saying, “No one is going to be a meaningful player in this industry without carrying ESPN.”

That’s a tough pill for Dish to swallow but one that it may be forced to take if ESPN continues asking for higher prices. Neither company would benefit from a dropped contract, but neither have jumped to compromise, either. It still remains to be seen whether the two will be able to work out their issues before the end-of-September deadline, or if consumers should expect another blackout.

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