Getting Content for Dish's OTT Service

According to a report by Alex Sherman and Edmund Lee for Bloomberg, Dish is planning to launch the first mainstream* Internet-delivered "cable TV" service sometime late this summer. The long-rumored over-the-top cable service may finally emerge after lots (Intel) and lots (Sony) and lots (Microsoft) and lots (Apple) and lots (Google) of rumors.

OTT probably won't involve an ethernet cable running straight into your set; it probably will use a Roku-like box

The report states that Comcast's NBCUniversal (USA, Syfy, CNBC, MSNBC, Bravo, E!, among others), A&E Networks (A&E, History, Lifetime, among others), Turner Broadcasting (TNT, TBS, CNN, Cartoon, TCM among others) and CBS (the CBS broadcast network, Showtime and the relatively small CBS Sports Network) have been approached about providing content for the service.

As followers of the industry know, Dish and Disney/ESPN entered into a ground-breaking deal a few months ago that would permit the distribution of several of the Mouse's marquee service on an OTT service. I posted about it here. While the deal was conceptually ground-breaking, however, no ground has been broken to date.

As I noted in the earlier post, it is not unusual in such an agreement that Disney would insist on a "critical mass" of other programmers also be included in any such efforts. (If there is nothing else in the package, then the package would effectively be an a la carte offering of Disney's networks.). The Bloomberg article confirm's my suspicion:  "The largest content providers have placed several conditions on Dish’s service before they’ll agree to deals, according to two people familiar with the matter. At least two of the four major broadcast networks -- ABC, CBS, Fox and NBC -- must be included in the service, and at least 10 of the highest-rated cable networks must also be part of the package."**

An older graphic with the NBCU brands at the time of the merger -- Daily Candy, Sleuth, Style and Versus are all no longer; Cloo, Esquire and NBC Sports Networks replaced the latter three

NBCU represents a particularly interesting potential content provider for the Dish OTT. As part of the Comcast acquisition of NBCU, the company is subject to a consent decree that, among other things, requires NBCU to sell similar programming to an online video provider that some of its competitors are selling and do so under comparable terms to which the competitor got. The recourse for the potential licensee (Dish, in this case) is that if it doesn't think it is getting a fair shake from NBCU, it can submit the dispute to the Department of Justice for arbitration.

What that means in this context is anyone's guess. If I were advocating for NBCU, I would hold that the restrictions on the Hopper than Dish agreed to with ABC would have to apply to NBC as well. My guess is that Dish is willing to go there. The agreement that Dish made to launch Disney Junior, Fusion (the English-language news service targeting Latinos), Longhorn Network (University of Texas sports service run by ESPN) and the upcoming ESPN Southeast Conference network appear to this observer as a substantial portion of the overall package that Disney received in conjunction with its grant of the OTT rights. I think it is less likely that Dish would be willing to launch and/or favorably retier virtually everything in the NBCU stable of networks to get the OTT rights; certainly Dish won't start the negotiation there.

For those unaware, Dish is a company known for using the legal process aggressively to try to gain an advantage at the bargaining table. If I were advocating for Dish, I might take the position that NBCU has to give up OTT rights to Dish only for the consideration that is explicitly tied to such rights (e.g., fees and packaging provisions for OTT customers) not consideration that Dish provided to Disney for its DBS customers.


* non-mainstream over-the-top Internet-delivered cable TV services have existed for a while including Dish's own DishWorld (mostly foreign-language international services) and Sky Angel (mostly religious-oriented services)

** The required inclusion of broadcast channels in the package could complicate things considerably -- the broadcast networks do not control all of their affiliates, they can only grant retransmission consent for their owned & operated stations (NY, LA, Chicago and a handful or two of other large markets) which would make the OTT service something only available in certain markets. Including some broadcast channels but not others (e.g., not the weaker stations which have "must carry" rights on DBS and cable) might lead to complaints to the FCC from them. Again, complications.

Cox Has Shut Down Its OTT Service FlareWatch

Cox has abandoned its over-the-top service FlareWatch, which only launched around the start of July (link is to my initial post on Flare). The trial of the service ends 27 September 2013 and "Becky" from Cox Customer Care reports that the company will refund customers for their out-of-pocket costs for the service (e.g., equipment). Confirmation is in the tweet below. I believe this news has yet to be reported anywhere else.

A reader of this site and potential Flare customer, Teddy Wong, contacted Cox about subscribing to the service in early September and reported that his "order was cancelled without notice". Certainly not the response one would expect from the cable incumbent with the top reputation for customer service.

Prior to Cox's tweet, an attempt to access the website for the service, watchflare.com, yielded a page with the logo and the message "Service Unavailable", and a "503 Service Unavailable" error message, although through Google I can still reach the page with the Flare pricing and information about the service.

The Flare index page appears to have been taken down

But the detail and order pages are still accessible

Speculating, here's some reasons that Cox has pulled the service, quickly and in a seemingly unplanned fashion:

• Broadcasters and cable programmers have notified Cox that they have not granted rights for such a service.
• Cox has noticed that the lower-priced Flare service is cannibalizing their traditional cable TV service to a much greater extent than it is adding revenue to Internet-only customers
• Cox is noticing technical problems delivering a high quality version of the service

As I noted in the earlier post, I believe that Flare is an unprecedented service. While many cable operators offer some, most or all of their cable TV lineup to devices other than traditional televisions (e.g., web browser, iPad, Roku apps), all of them are providing it as "added value" to cable TV subscribers who also subscribe to the operator's cable Internet service. None are offering it as an alternative. The major broadcasters and cable programmers like the current pay-TV ecosystem and could be threatened by (and unwilling to support) any new precedent.

The only over-the-top service from a traditional operator is Dish's DishWorld service which is delivered via the Internet to Roku boxes, Macs, PCs and several other devices. DishWorld, however, does not deliver any household name US cable or broadcast services. The closest thing to such a service on its lineup is Bloomberg TV, which itself is streamed online at bloomberg.com. Most of DishWorld's 13 English-language channels are all from international programmers (e.g., France 24, RT [formerly Russia Today], Euronews).

Update (3 October 2013): Erik Brannon of IHS speculates/calculates that Flare was shut down because it wasn't profitable enough. This theory does not ring true to me; Cox certainly knew the margin on the service before its launch and could have priced it higher to address this concern. Brian Santo's post in CED sees through the IHS analysis, and adds quotes from Cox which also deny Brannon's speculation.
Update (1 November 2013): Cox is evaluating a next-generation IP video service (like Flare) per Steve Donohue in Fierce Cable.
Update (4 November 2013): Donohue's interview with Cox's CTO Kevin Hart who said that Flare customers were buying the service in addition to Cox's video, which seems surprising and counter-intuitive.