UPDATE 3-Dish eyes Internet TV services in landmark Disney deal

Tue Mar 4, 2014 11:51am EST

By Liana B. Baker and Varun Aggarwal

March 4 (Reuters) - Dish Network Corp and Walt Disney Co have reached a long-term programming deal, allowing the No. 2 satellite TV provider to carry Disney-owned networks such as ABC and ESPN and deliver the content outside of a traditional TV subscription.

The deal announced Monday marks the first time that a U.S. pay-TV operator was given flexibility by a media company to offer its content over the Web through smartphones, tablets and computers.

Until now, content owners had not granted cable or satellite TV operators the digital rights to sell their shows outside of a pay-TV subscription.

"The Dish/Disney deal appears to set the stage for a new wave of broadband-delivered video services," said BTIG analyst Rich Greenfield.

The companies said Dish gets the right to stream "linear and video on demand content" from channels such as ABC broadcast stations and cable networks such as Disney Channel and ESPN as part of an internet-delivered IP-based multichannel offering.

"Disney comes out a winner" because its new college football network gets national distribution through the deal and it settled an area of conflict regarding Dish's commercial-skipping digital video recorder (DVR), MoffettNathanson Research analyst Michael Nathanson said.

Disney shares rose 3.1 percent to $82.00 leading the Dow Jones Industrial average.

It was "one of the most complex and comprehensive" deals it has ever undertaken, said Anne Sweeney, co-chairwoman of Disney Media Networks.

Dish did not provide details on its potential TV subscription over the Internet, but a big market is likely waiting for such a product.

North American consumers will spend $6 billion in 2014 on entertainment from over-the-top services such as Netflix, more than twice what they spent in 2010, according to PwC's annual entertainment and media forecast.

Sony Corp has been working on an Internet TV service that is expected to come out this year. Intel Corp's efforts to launch one was recently bought by Verizon Communications Inc.

LAWSUITS SETTLED

Dish chairman Charlie Ergen has talked about the need to suit viewer's changing habits and acknowledged that a small but growing number of customers are "cutting the cord" or cancelling traditional TV and just subscribing to internet service.

Ergen ruffled the feathers of broadcasters by rolling out a service called AutoHop that lets viewers automatically skip commercials on recorded programming on its DVRs, but discontinued the service for ABC programming as part of the deal.

AutoHop sparked a lawsuit between the two companies. Disney and Dish's programming agreement expired at the end of September, but they averted a blackout of Disney's top networks for the satellite provider's 14 million customers.

The deal will result in dismissal of all pending litigation between the two, including disputes over PrimeTime Anytime and AutoHop, the companies said in a statement.

The deal includes digital rights for mobile apps such as Watch ESPN and Watch ABC.

Dish will carry Fusion, a new English-language news channel aimed at young adults and the SEC Network, a college sports network from ESPN launching later in 2014.

Dish, like its larger rival DirecTV, does not offer broadband Internet service like cable companies so it has been experimenting with ways to adapt.

DirecTV CEO Mike White has said the No. 1 satellite operator is working on an "over-the-top" video package to suit niche audiences such as Hispanic or kids programming, but hasn't given details on that product yet.

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