DISH Goes to War With Local ABC Affiliate, Arms Customers With Digital Antennas

Financial disputes between broadcast or cable networks and pay-television providers have often resulted in channels going dark in local markets. Cable and satellite companies pay each channel a fee in order to rebroadcast it. This can be as small as a fraction of a cent for obscure channels to about $8 per subscriber for ESPN. The numbers vary deal to deal, but without a such a "carriage" agreement, the pay-TV company can no longer offer the channel or channels in question.

Generally, these negotiations are a game of chicken. The network tells its viewers their satellite or cable provider is at fault while the provider blames it on the channel being greedy. For the viewer, it's not really about who's to blame, because no matter which side is stopping a deal, the result is the same -- not getting the channel.

In a carriage dispute in Rhode Island between DISH Network (NASDAQ: DISH) and the local ABC affiliate, the satellite company has a novel approach. It's playing hardball with the network by offering its subscribers free antennas that would allow them to pick up the ABC station over the air (OTA), according to MultiiChannel News.

What is DISH doing?

The satellite company wants to show ABC it does not need it. In the Rhode Island dispute, DISH is not only offering free antennas, it's offering customers $10 off their monthly bill if they agree to drop their local channel package.

DISH is playing a risky game because while broadcast channels are available over the air and can be picked up with an antenna, signal strength can vary and some people may not get a good picture or may not be able to pull in a viable signal for ABC or other local channels at all. Here is the FCC's guide to TV antennas.

In addition, using an antenna to get local channels is not the same experience as having them in your DISH package. Instead of being able to flip through all the channels you have available, the user will have to switch inputs between the satellite package and the OTA stations.

How will this play out?

Ease of use may not matter to people who might be happy to either use the antenna just for ABC or drop local channels to save the $10 a month. In other cases, however, learning that OTA channels are an option may be the catalyst for people to cut the cord.

DISH may get ABC to make a better deal in the market, or it may find that its customers like using an antenna enough that they no longer need the satellite provider.

This is one small market in Rhode Island, but could be a sort of litmus test for future deals going forward. Cable and satellite companies have been pushing back against carriage fees and looking for ways to offer bundles at varying price points without some popular channels.

For networks like ABC, seeing consumers drop local channels in favor of getting them for free over the air jeopardizes a key source of revenue. For DISH and other providers, not having a full channel lineup runs the risk of consumers either switching to a rival that does or dropping pay-TV all together.

What happens here may well provide DISH with a blueprint for how to deal with broadcast networks going forward. Whether that will be to make deals at all costs or to hand out antennas and discounts remains to be seen.

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