Earlier this year, a dispute between Dish Network and ESPN went to court and was made public. Dish was seeking $150 million in damages because of disagreements over their contract with ESPN. As a refresher, Dish accused ESPN of breaching their contract by giving other providers more favorable terms in certain instances. In the end, Dish was only awarded 3% of their claims in the lawsuit in a victory for ESPN.
With that situation being resolved in March, we've now come to another inflection point in the Dish-ESPN relationship. Their carriage agreement is set to expire and in an increasingly volatile marketplace with not the best history, there are doubts whether the two sides can reach a detente. Here's the details from MediaPost…
"ESPN’s eight-year deal for carriage on Dish Network is set to expire next month. If the two sides like each other, certainly Dish’s behavior indicates the opposite as its engaged ESPN in all kinds of litigation in recent years.
Testimony in a recent federal case indicates the ESPN-Dish agreement lapses on Sept. 30 when all that gridiron interest is percolating. So, the date could offer an impetus for Dish to make a deal and prevent an ESPN blackout in its 14 million-plus homes.
CBS hasn’t had the NFL luxury yet in its fee battle with Time Warner Cable that has brought a blackout in millions of homes. But the number of households affected isn't nearly as many as could be left without ESPN and maybe other Disney programming in the ESPN-Dish fight.
How much is at stake? Billions of dollars. Testimony indicated Dish is paying an average of more than $5 a month per subscriber for ESPN. Under, say, an eight-year deal with an annual increase of 5%, Dish would be paying well over $7 a month per subscriber at the end of the contract. At a 6% rate, it would end up owing just about $8."
Will the Dish-ESPN relationship go the way of Time Warner Cable and CBS, who are currently battling it out in public over subscriber fees? Just how much can ESPN charge for distribution before these providers say enough is enough? Keep in mind ESPN costs about 5 times the next most expensive cable network to carry at over $5 per month per subscriber. Considering they just tried to squeeze pennies out of ESPN in a lawsuit, will Dish be content to carry ESPN at an even higher rate? Anyone who remembers Dish's ugly dispute with AMC knows they're willing to play hardball.
In fact, Dish chairman Charlie Ergen said on an earnings call he may do exactly that with not just ESPN, but all the Disney owned networks including ABC. Via Variety:
“We’ll work first and foremost to find a deal with Disney that makes sense for our customers,” Ergen said on the company’s earnings call this week. “If we get that deal, we’ll do it. If we don’t get that deal, we’ll part ways — simple as that.”
Watch these negotiations carefully. The debate over a sports rights bubble and questions regarding a la carte cable pricing are in the forefront of many minds within the industry. Hostile standoffs between networks and distributors are reaching critical mass. Dish and ESPN/ABC appears to be the next faceoff that will have an impact on viewers.
In the end, sports fans are left in the middle of these multimillion and billion dollar companies seeing which one will blink first over fees. If Dish plays hardball with ESPN, perhaps that will inspire other distributors to do the same over rising costs. It may also cause those competitors to capitalize and look to get Dish customers who are sports fans to switch providers.
In these next round of negotiations, we may begin to finally get some answers to the what the future of televised sports and cable television will look like. We may finally see whether or not the sports rights bubble is a myth and a la carte cable pricing is a red herring. And it will begin and end with ESPN as the biggest kid on the block.