Will Dish dump Disney over ESPN?

The satellite service provider protests against the high costs of sports programming.

By Trefis Sep 10, 2013 2:47PM
 copyright Ghislain & Marie David de Lossy, Cultura, Getty ImagesDish Network's (DISH) contract with Disney (DIS) to carry ESPN will expire at the end of September, and the negotiations could be rough in view of the recent dispute between Time Warner Cable (TWC) and CBS (CBS). 

Dish has rallied against the high costs of sports programming and has hinted at its willingness to go without Disney channels. If that were to happen, Dish would be at a significant disadvantage given the popularity and demand of Disney's networks. But at the same time, Dish would lower its costs substantially. 

While this issue once again highlights the frustration of pay-TV operators over the rising costs, content owners continue to eye a bigger share of the television market.

Dish Network Stock Break-UpDisney has an upper hand in the dispute

Dish currently pays ESPN more than $5 per month for each subscriber, compared to $3.26 a month when the contract first went into effect in 2005. Dish CEO Charlie Ergen recently stated that in longer run, the pay-TV provider could offer TV service without sports channels -- and he says he is prepared to go either way. ESPN, on the other hand, made a strong point that it is helping pay-TV operators retain customers at a time when on-demand entertainment programming such as Netflix (NFLX) could provide an incentive for subscribers to drop connections. 


At Trefis, we believe that there is a huge demand for sports content and media companies have an upper hand in such disputes, as evident from the case of CBS and Time Warner Cable (Trefis).


Why is ESPN important for pay-TV operators?

ESPN is the worldwide leader in sports programming and has rights to telecast major sporting events such as NFL, NBA, and the FIFA World Cup. EPSN is the golden goose for Disney and accounts for 40% of the company's value according to our estimates. The network has close to 100 million subscribers in the U.S. However, the network's true value lies in the high fee per subscriber that it charges for its sports programming. The estimated figure stood at $5.05 in 2012. ESPN's sports programming reflects high-demand content that viewers don't record on DVR and unlike other programming, it's not available from Netflix or other on-demand services.


Frustration over rising sports costs

According to research conducted by SNL Kagan, sports channels such as ESPN and regional sports networks account for 20% of fees paid by cable and satellite operators and have been the primary culprits behind rising cable bills. Nielsen estimates that apart from the NFL and the biggest games of the year in a handful of other sports, the TV audience for sports is small amounting to about 4% of the households.


Some pay-TV operators fear that sports fees could eventually drive customers away from pay-TV subscriptions. Given the fact that the demand for big sporting events is huge for now, major sports networks may still have an upper hand in negotiations. If Dish takes a decision to drop ESPN, the company risks losing subscribers. In its recent earnings, Dish saw a loss of 78,000 pay-TV subscribers due to lower gross new activations and an increase in its churn rate (Trefis). 


However, the satellite company will save close to $800 million annually and this will lead to lower pricing for its packages, which may attract more customers who are not big sports fans.

35Comments
Sep 10, 2013 4:49PM
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I dropped Time Warner 2 years ago because of ESPN. Time Warner had to keep jacking up fees due to ESPN's demand for higher revenue so I finally said screw it. Had enough of billionaire sports owners and millionaire players all whining they don't get enough advertising revenue. I would actually consider DISH cable WITHOUT any sports programming involved. Kudos to DISH. In my circle of professional careered friends, I don't know a single person who has cable TV
Sep 11, 2013 9:11AM
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Why there is not an a-la-carte method of ordering the 10 channels that I actually watch instead of 3,429 channels of absolute crap is beyond me.

I don't watch sports.  Have not watched ESPN in at least a decade, yet I have to pay for their crap.  If it weren't for the two young kids I would drop it an save $850 a year.  My contract is out in 2 years, and I might as well kick it then.

The useless, moronic, half-wits in Congress don't have the guts to do what is in the best interest of the people and stand up to the cable and satellite providers and say "do it" and make it a la carte.  This is freaking 2013, it cannot be that difficult to make so I get what I want, and some sports addict gets what they want.
Sep 10, 2013 3:44PM
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Truthfully, I have Dish Network but ever since Netflix came around (I have a ROKU box), I rarely watch cable unless a show I really love is premiering new episodes (Breaking Bad, Mad Men & Sons of Anarchy). Other than that, why I pay $80 a month for the most basic package is beyond me. My contract ends in January, so..
Sep 10, 2013 10:46PM
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Since I cannot use other four letter word, I say screw ESPN, any person or corporation can be replaced.  I only watch college football, but I also love listening to these games on radio for free..
Sep 11, 2013 9:35AM
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A-la-carte needs to become a reality.

 

It's these damn over huge content providers like Disney fighting it.  It's about time that any TV channel lived or died on its own merits instead of the merits of everything else around it.

 

PS:  ESPN Sucks, may want to keep other Disney channels though.

 

 

Sep 10, 2013 10:45PM
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would not care less. waste of time watching anything of pro-sports

 

 

 

 

 

 

 

 

 

Sep 11, 2013 2:20AM
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Good 4 Dish. Tired of the Chris Berman's of the world soaking the working stiff for a little entertainment.
Sep 10, 2013 10:42PM
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Give it some time, mostly short time and all channel's will be available on Netflix or even Roku. The internet is the future. Cable is 1970's, Satellite 1980's, Dish and Directtv 1990's
Sep 11, 2013 10:08AM
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Dump all satellite sevices until they stop the endless commericals and give us a choice of what we want.

I dumped them years ago. Why should I pay them to watch commercials ???

 

Sep 11, 2013 5:01AM
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I would like to have cable or sat. but it's as much as my home insurance cost,and I live where there are hurricanes, just so way out of line.
Sep 11, 2013 10:55AM
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I really wish cable and satellite service would let is pick the channels we want to pay to receive. ESPN would not be on my list to keep, nor would the Cooking Channel, TLC, E! or a bunch of other channels that I seldom or never watch.

 

The bundling of channels is a way to force providers to include all sorts of channels that may not be used by a particular household.  I do occasionally watch Disney channels, the ones with family programming on them. I almost never watch sports. Sports are over hyped and overrated and the big dollar world of stick and ball sports is not worth my time.

 

 

Sep 11, 2013 11:32AM
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Sick and tired of all the money the public throws at these athletes and owners. People should go to their local high school games, and support out kids and our communities instead of supporting millionares.
Sep 11, 2013 10:05AM
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I think it is totally ignored how many people really dislike sports.  You tune in to a so called movie channel and they throw in some stupid sporting event.  They don't cut into sports channels with other programming.  How many stinking sports channels are needed?  Bolivian ice hockey?  They always saturate viewing with sports and infomercials and run the same FEW movies countless times.  We pay for this, as they have you by the short hairs -to at least have something to watch.  When cable TV started, they touted NO COMMERCIALS, because the viewer was paying, then the commercial crept in and now the cable companies are double dipping.  Free TV is being stomped out by the politicians, so it's a lost cause.  TV viewing was better in the 60's and 70's.  I've always said to people, if you should be a shift worker and come home to relax after 11 pm, you've got absolutely nothing to watch, really gotten to be a bad situation.  ENOUGH SPORTS ALREADY!  
Sep 11, 2013 11:06AM
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Seriously, I really do not watch ESPN.  And ESPN2, ESPN News, UESPN, ESPN classic... Really?

 

I should not have to pay for this.  I have argued this with friends and they go on the whole 'man' thing about how I'm not a real man.  Lol... Screw them, screw ESPN and their fees.  I love nothing better than when someone at work on Monday asks me about some irrelevant game between 2 obscure colleges I've never heard of over the weekend and I tell them I have no idea what they are talking about.

Sep 11, 2013 11:00AM
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This article makes a good point, if it weren't for ESPN I would stop paying for cable and just watch my Netflix.
Sep 11, 2013 8:29AM
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Don't care, I'm dropping dish for carrying Al Jazeera
Sep 11, 2013 12:59PM
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A la cart channels is the way to go...the first company to start such a program will be widely popular...I love my ESPN channels and my daughter (6 years old) loves Disney, although her favorite cartoons she watches are over the internet for free (old school Donald duck, chip and dale ect)...If Dish network dropped these channels I would cancel my satellite immediately...DISH dropped FOX last year and I cancelled it immediately...They gave me free movie channels for a year and upgraded my DVR package for free also to get me back.  Don't take channels away that people paid for when they signed on, it only angers your customers.

Sep 11, 2013 12:29PM
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I ve had dish and direct tv. Got out of both. All you are doing is paying for the 5 channels you watch. 95% of what is on is a rerun. History and dicovery channel all have same material just different titles. Do I really need the Knife channel and all the other shopping channels. How about the Christian channels NOPE. As for Espn quit talking and speculating that is all they do so this just makes idiots the arm chair quarter backs. So tired of hereing people blab about sports and they have not even played. I love sports to watch hate the 4 hour pregame the 20min halftime and the week long post game. Just play the game whoever wins or loses doesnt even matter. Tired of Fantasy Football for real who cares. Just the douchbags cant pick a team to win so I have to pick players on different teams stupid. with that I stream everything off smart tv takes getting used to but its free. Nfl games i get for 5 dollars a month on nfl network mirrored from phone to tv. Cable is useless stream is going to take over the rest of you should look into it well worth it and will get better once the population figures it out.
Sep 11, 2013 11:00AM
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Disney has absolutely RUINED ESPN.  When I was in college I would watch the replayed West Coast SportsCenter all morning long.  Now, I can hardly watch more than 10 minutes of SC (well, none at all since I dropped cable).
Sep 11, 2013 12:13PM
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They are talking about dropping Disney, not ESPN.
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