Dish Network about 25% of the Way Towards an Over the Top Video Service
Dish says it would like to sell such a service for about $20 to $30 a month. Whether that is possible is the issue.
The reason is the cost of acquiring programming rights. Assume that the content owners do not believe their content is worth less if delivered online, than by a video subscription distributor.
Assume the content rights therefore will cost about the same, for equivalent expected volume, for either linear or on-demand delivery.
The three largest U.S. cable operators (Comcast, Time Warner Cable, Charter), presumably including those with the best per-subscriber prices, paid about $34.06 per subscriber, on average, for programming rights, in 2012, representing 41 percent of total revenue.
Charter’s average monthly programming cost per video subscriber is significantly higher at $38.93 per subscriber, in 2012, compared to Comcast’s $31.53 per subscriber.
Sports programming, for example, can run as high as $35 a month, per subscriber, depending on how many sports channels are offered as part of a programming package. Granted, limiting the amount of sports content would be an important way to limit end user costs.
Where ESPN costs perhaps $5.50 per subscriber, per month, other popular networks cost less than $1 per subscriber, per month.
Granted, most believe an eventual streaming service would not carry the full expanded basic lineup of channels, just the most-popular channels and networks. But programming costs alone would suggest it will be impossible to hit the $20 to $30 a month retail price target.
And that is before marketing costs, overhead and any content delivery fees or transit fees.
On the other hand, Dish Network has gotten a significant distance towards assembling an attractive programming lineup, perhaps a quarter of the way.
Though Dish Network has gotten rights to eventually stream Disney content, it still has not yet gotten a critical mass of rights to stream other major network content, something even Disney insists must be in place before a commercial, stand-alone streaming service could be offered.
By itself, Disney might represent about 24 percent of all programming costs for a typical linear video entertainment distributor.
Time Warner represents perhaps 21 percent of the program rights cost, NBC about 16 percent, Fox about 14 percent.
Getting the three other top networks, in terms of programming cost, would allow Dish Network to provide roughly 75 percent of the value of a subscription, one might roughly argue.
In fact, those four networks account for 75 percent of programming rights fees, and if you assume costs are roughly in line with perceived value, then Dish Network has to reach deals with three more firms to deliver about 75 percent of the value of a traditional video subscription.
Disney distributes the ESPN and ABC family of channels. Time Warner owns TNT, TBS and CNN. Comcast, owns Bravo, USA Network and NBC. News Corp. owns Fox News and Fox broadcast channels.
So it is reasonable to wonder whether Dish could sell an over the top video service for $30 a month, Dish might have assembled about a quarter of the content it needs to create a credible alternative to linear video services.
|source: The Atlantic|