CBS's Deal With DISH Was About More Than Money

By Markets Fool.com

Earlier, CBS started a website to persuade DISH Network subscribers to switch providers. Source: CBS.

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CBS is back on DISH Network . After contentious negotiations exceeded their Nov. 20 expiration date, the companies continued their war of words both privately and publicly, but the network remained on the air. After a short break in programming on a Friday night -- the least painful time to be off the air, perhaps by design -- the two companies inked a multi-year deal.

While the financial terms of the deal weren't disclosed, supporting rights agreements point toward a wide-ranging negotiation that addresses many of the points of contention between programmers and pay-TV providers. First, DISH will get the rights to deliver CBS-owned Showtime to mobile devices but not the rights to CBS programming for an over-the-top video service.

Finally, the deal addresses pending litigation between the two companies in response to DISH's "AutoHop" ad-skipping playback feature. DISH subscribers with the DVR feature won't be able to use it on recorded CBS shows until the seventh day.

Both companies are no stranger to tough negotiations
It isn't as if each side is a stranger to these tough, gritty types of communications. Earlier this year, agreements between DISH and Time Warner's Turner Broadcasting broke down, with the result that CNN, TruTV, and Cartoon Network were blacked out on DISH Network. After a rather long blackout of one month, the channels returned to DISH tentatively while negotiations have continued behind the scenes.

CBS has also been known as a tough negotiator. Last year, a spat with Time Warner Cable ended with a blackout of CBS in New York, Los Angeles, Dallas, Boston, Chicago, Detroit, and Pittsburgh, and The Movie Channel, Showtime, and The Smithsonian Channel nationwide. Time Warner Cable reported losing 306,000 television subscribers that quarter -- a number Nomura analyst Adam Ilkowitz called "shocking." Ilkowitz went on to directly blame the blackout for 100,000 to 150,000 subscriber losses that quarter.

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CBS had a secret weapon
Earlier this year, when referencing the dispute, CBS CEO Les Moonves muttered a not-too-veiled threat at the RBC Capital Markets 2014 Technology, Internet, Media, and Telecommunications conference by recalling a conversation: "As I said to Charlie Ergen, 'Your people won't be very happy with the Denver Broncos not on the air Sunday.''' Ergen is the co-founder and current Chairman of Englewood, Colorado-based DISH Network.

Football and live events are a powerful tool against cord-cutting -- a trend in which consumers are abandoning pay-TV providers and instead choosing to go with streaming-based services such as Netflix and Hulu Plus. In addition, CBS's status as the most-watched network helps the company demand higher retransmission fees and content costs.

OTT is becoming more important to MVPDs and programmers
Over-the-top programming, or content delivered without multichannel video programming distributors (read: pay-TV providers), or MVPDs, is quickly becoming a source of contention among stations and MVPDs. Earlier this year, CBS launched its OTT service, CBS All Access. Now DISH is planning to release its own OTT service, dubbed Nutv, to target those without currently without pay-TV with a smaller, cheaper bundle of channels.

During this contentious negotiation period, Ergen addressed CBS's All Access plan as an "interesting business plan" but said the existence of an alternative means of viewing makes "the product less interesting for MVPDs." Of course, that could have been negotiating bluster, but perhaps he should be asking this question: Will the existence and proliferation of OTT services make MVPDs less interesting to consumers?

The article CBS's Deal With DISH Was About More Than Money originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends and owns shares of Apple, Google (A and C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.