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Is Disney Heading Towards a Clash with the Dish Network?

Is Disney Heading Towards a Clash with the Dish Network?


Is Disney Heading Towards a Clash with the Dish Network?

Disney Heading Towards a Clash with the Dish NetworkNEW YORK – On Monday, a team of analysts from Fusion Research predicted that a contract dispute between Walt Disney (NYSE:DIS) and the Dish Network (NASDAQ:DISH) was inevitable.  The current rebroadcast agreement between Disney and the Dish Network is set to expire on September 30.  While the companies are currently negotiating a new agreement, the primary sticking point revolves around the rebroadcast fees that Disney wants the satellite network to pay for access to its content.

If the recent dispute between CBS (NYSE:CBS) and Time Warner Cable (NYSE:TWC) is any indication, the negotiations may not end well for the Dish Network.  To end their dispute with CBS, Time Warner conceded on fees for the rights to rebroadcast CBS’ content and the right to resell the digital broadcast rights to web-based distributors such as Hulu (which recently CBS announced a deal to broadcast certain shows), Netflix (NASDAQ:NFLX), and Amazon (NASDAQ:AMZN).

According to Bill Carter of the New York Times, the CBS dispute illustrated the power that content providers currently have over distributors and the emergence of streaming has further diminished the distributor’s position.

The situation is even direr for the Dish Network as the loss of Walt Disney’s ESPN channels could significantly affect the satellite network’s 14 million subscriber, who will most likely switch to other pay-TV providers or online.  The timing could not be worse as the contract renewal comes during the heart of the football season – college basketball is also around the corner.

Currently, the Dish Network pays Disney $ 5.54 per month per subscriber for the rights to rebroadcast ESPN, but according to sources with knowledge of the negotiations, the rate could rise as high as $ 7 per subscriber per month.  ESPN is currently rebroadcast on the seven main pay-TV networks so a blackout on the Dish Network would have minimal impact on ESPN and Disney.

Fusion Analysts also predicted that Disney’s revenue growth rate of 7 percent would remain constant and that the resorts division of the media empire would generate almost $ 4 billion of revenue in the fourth quarter.    With the stock up more than 36 percent this year, it is would appear that Disney still has some room to grow, and the analysts chose the company as a strong buy.

Shares of Disney closed on Monday just off its 5-year high at $ 66.94.

About Eric Kelso

Eric Kelso covers market updates and stock related news.

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