Dish Customers Are Coming Closer to Losing Disney

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Dish Network (NASDAQ:DISH) and Walt Disney Co. (NYSE:DIS) have until Monday night to work out a deal regarding retransmission fees, or Dish customers could lose access to Disney’s programming, which includes popular networks ABC and ESPN, according to The Wall Street Journal.

The two parties have been negotiating since earlier this month. Dish CEO Charlie Ergen has been outspoken about his belief that sports programming has become too expensive for pay-TV providers; ESPN is the most expensive television network. While Ergen has tossed around the idea of offering a cheaper, sports-free package to customers, he hasn’t gone forward with those plans just yet.

Dish has 14 million subscribers, many of whom would likely be unhappy at the prospect of losing Disney programming and, in particular, ESPN. Dish’s chances of losing customers to rival services give Disney some leverage in the negotiations, but as of late, pay-TV providers have been more reluctant to allow networks to demand high fees.

In August, Time Warner Cable (NYSE:TWC) customers experienced a blackout of CBS (NYSE:CBS) that lasted a month before the two companies reached an agreement on Labor Day. Time Warner accused CBS of asking for ridiculously high retransmission fees, while CBS said that every other pay-TV provider in the country had accepted its terms.

Sports TV is difficult turf for providers to negotiate. It is the most expensive type of programming, but also one of the most popular. On one hand, by not needing to pay high fees for sports programming, pay-TV providers could charge their customers less and possibly reduce the number of people who become “cord-cutters” by switching from traditional pay-TV services to online streaming services like Netflix (NASDAQ:NFLX). On the other hand, live programming — especially sporting events — is one of the only major reasons not to ditch pay-TV for online streaming, which doesn’t have access to live programming.

Adding to the tension is ABC’s suit against Dish’s DVR service, Hopper, which allows users to skip the commercials on prerecorded programs. A New York judge denied ABC and CBS’s request to issue an injunction against the Hopper DVR earlier in September, but the networks’ suit against Dish over the DVR is still ongoing. Networks believe that such technology undermines their entire advertising system and will make TV ad time less valuable.

If a decision isn’t reached by Monday night, then the parties have the option to extend their talks without a blackout. Blackouts like the one between Time Warner and CBS are bad for both sides, as networks can lose ratings and pay-TV providers can lose customers, but given ESPN’s immense popularity, Ergen might have to swallow his pride and pay what Disney’s asking.

Follow Jacqueline on Twitter @Jacqui_WSCS

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