DISH Network Corp (DISH) Is One of Two Companies Disrupting Broadcast TV. Who’s The Other?

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The Masters, a golf tournament more about tradition than any other, took a step outside the box last weekend by offering a bevy of live streams through its website and app for Android and iOS. While the app downloads only represent a fraction of the nearly 18 million viewers that tuned in for the exciting playoff finish of the 2013 tournament, it signifies the shift in consumers’ viewing habits and trouble for broadcast networks.

Browser-based video viewing has quickly grown to the number 1 activity on tablets. As a result, video ads cost three times as much as in-app advertisements. Couple that with increasing downloads of video-centric apps like YouTube and Netflix, Inc. (NASDAQ:NFLX), and the change in TV economics becomes quite clear. Here are two companies accelerating this trend.

DISH Network Corp. (NASDAQ:DISH)

DISH Network Corp. (NASDAQ:DISH) first aroused the ire of broadcasters last year when it introduced its proprietary DVR service the Hopper. The system lets you “AutoHop” through commercials during recorded primetime programming without even having to push a button. Upon its release, it immediately incited litigation from all the major broadcasters.

DISH Network Corp.

In addition to the Hopper, DISH Network Corp. (NASDAQ:DISH) has partnered with Slingbox to beam live TV and recorded shows to subscribers’ internet-enabled devices. Tablet viewers have the same “AutoHop” benefits as couch viewers, but this service is a further threat as it goes head-to-head with Hulu Plus, which is co-owned by three of the big four broadcasting networks – The Walt Disney Company (NYSE:DIS) (ABC), Comcast Corporation (NASDAQ:CMCSA) (NBC), and News Corp (NASDAQ:NWS) (FOX).

DISH Network Corp. (NASDAQ:DISH) made further waves earlier this week when it announced a bid for 68% of Sprint Nextel Corporation (NYSE:S). While most view the bid as a play on becoming a quad-provider – television, internet, phone, wireless – there’s potential for even further integration. Dish could bundle Sprint Nextel Corporation (NYSE:S) mobile data packages for use with its TV streaming service.

A product like that is unparalleled by anyone as large as DISH Network Corp. (NASDAQ:DISH). It could further convince users to switch by placing its own ads in what used to be commercial-free streams to non-Sprint subscribers. Invariably, network broadcasters would become further ticked by this ad replacement scheme, but there doesn’t appear to be anything they can do about it besides wait for the courts to decide.

Aereo

Another company in the news lately, Aereo, is battling the big broadcasters in court as well. The media giants failed to win a preliminary injunction against the company last summer, and lost their appeals earlier this month in the Second Circuit Court of Appeals in New York.

What has the broadcasters up in arms is Aereo allows subscribers to view live and time-shifted streams of over-the-air television on their internet-connected devices. Unlike cable companies, however, Aereo doesn’t pay any of the media companies for their feed. Instead, it operates on a loophole by leasing each customer with his own antenna to receive the signal.

The media companies’ failure to make progress in the courts caused FOX President Carey Chase to threaten to take his network to a pay model. CBS Corporation (NYSE:CBS) and Univision were on board with the idea as well. While I think it would be difficult for any of the broadcast networks to make the switch to cable, the threat is emblematic of how badly the TV broadcasters are hurting.

Aereo doesn’t really pose that big of a threat. It only operates in the New York area, while FOX, CBS, ABC, and NBC all operate on a much larger scale. Yet, it sets a precedent for companies to rebroadcast their signals without paying retransmission fees – something Dish Network battled for a long time.

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