Why DISH's Deal With Disney Matters for Internet TV

The deal between Disney and DISH is one of the biggest steps to date toward an Internet TV service, but there's still plenty to be done.

Mar 5, 2014 at 10:15AM

Internet TV has been an elusive pursuit for many tech and telecom companies. Apple has long been rumored to enter the space with its own service, as has Amazon.com. But so far no one has moved as close as DISH Network (NASDAQ:DISH) did this week.

Dish Disney Internet Tv 

Source: DISH Network. 

Give a little and get a lot
DISH's latest deal with The Walt Disney Company (NYSE:DIS) gave the satellite provider the rights to stream both live and on-demand shows from ABC, Disney, and ESPN networks on the Internet. It's the first time Disney, or any other U.S. content creator, has allowed a cable or satellite operator to use content this way.

To get Disney to agree to this, DISH will prohibit its users from automatically skipping commercials on the ABC network through its AutoHop DVR feature, until three days after the show airs. Killing off part of the AutoHop feature for the ABC network ensures Disney can make advertising deals around its content without worrying the ads won't be seen.

In addition to the content deal, Disney also agreed to drop current litigation against DISH for using the ad-skipping feature and its PrimeTime Anytime service.

How this brings us closer to Internet TV
It's hard not to think that DISH came out ahead in this deal, considering Disney is giving the satellite provider a chance to use Disney content in new ways.

DISH's CEO and president, Joseph Clayton, said in statement:

The creation of this agreement has really been about predicting the future of television with a visionary and forward-leaning partner. Not only will the exceptional Disney, ABC, ESPN entertainment portfolio continue to delight our customers today, but we have a model from which to deliver exciting new services tomorrow.

And that's the core of this new deal between Disney and DISH -- that the satellite provider could start offering new ways for consumers to purchase television content that doesn't fit into any current pay models. But why? Content providers like Disney know there's a change coming in television. Netflix's growing list of original content, in addition to movies and shows, has been the prime example of how users' expectations have changed and how new offerings and price points are now necessary.

Disney seems to recognize this. Anne Sweeney, the co-chairman of Disney Media Networks and president of Disney/ABC Television Group, said of the deal, "Not only were innovative business solutions reached on complicated current issues, we also planned for the evolution of our industry." For a major content creator to recognize this, and then make a deal with DISH based on it, is indeed a step in a new direction. But there's plenty of work ahead.

DISH isn't done dealing
Getting this deal with Disney is a massive move forward for DISH's Internet television ambitions. The satellite provider is now in a position to deliver content in ways that its competitors can't. New subscription models or a la carte services could come out of this, adding new revenue opportunities for DISH.

But launching a full-fledged Internet TV service will require a lot more deal making with additional content creators, which won't be easy. Now that Disney is on board, it could convince other content makers to do the same, but it's no guarantee. Intel ran into content problems before it sold its television service to Verizon Communications, and others like Sony are stuck in that stage as well.

Investors need to see DISH work out additional deals that benefit both the content creators and the satellite provider. Gaining Disney is a huge hurdle, but revolutionizing the television industry is going to take much more time. 

The war for your living room begins now
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.

Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple, Intel, Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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