Dish Network has attempted to make up for this week’s CBS channel blackout, which saw the US broadcaster pull 28 local channels in 18 markets, by offering subscribers free antenna installation to access CBS channels on over the air (OTA) TV at no additional cost, or the option to drop local CBS channels from programming packages and save $10 on monthly TV bills. This is a major statement from Dish which has never been scared to take on additional costs and go it alone, a sentiment CBS probably echoes.
Dish claims thousands of subscribers have already made the switch to OTA services, but a large proportion of its 13.2 million pay TV subscribers would rather pay the $10 extra than have an unsightly antenna, or make the final leap by cutting the cord altogether.
If Dish subscribers are that interested in receiving CBS channels, which many will be as CBS is showing its annual Thanksgiving Day NFL game this week, then CBS All Access offers an appealing alternative at $5.99 a month, along with live NFL games, 9,000 on-demand assets and CBS exclusives, although Dish’s $20-a-month Sling TV offers a more comprehensive streaming service more akin to what pay TV viewers are used to. These disputes seem to promote cord cutting, and are likely to accelerate it – but to whose advantage?
The two companies are in stalemate, both seeking ways to revive consumer interest, as viewing figures for CBS channels have plummeted by an average of 20% over the past 3 years, according to Dish, while Dish continues to shed subscribers, losing 129,000 in the last quarter. That is likely to accelerate without CBS, even for a short while. In the past we would suggest this is a storm in a teacup and that in a few days the blackout will be over – perhaps not this time.
The worrying truth for the pay TV industry is that subscribing to both CBS All Access and Sling TV would cost less on a monthly basis than a full pay TV subscription. Dish reported quarterly pay TV ARPU of $87.23 in its last results, whereas $26 a month, would bring a household Sling TV and CBS All Access combined, but Dish includes Sling TV in its earnings reports and the fact that this ARPU slipped by $2.21 in a year suggests that quite a few subscribers opted for Sling TV, so the real pay TV ARPU is much higher. Dish is preaching that subscribers could save $120 a year by cutting CBS channels, but the savings outside of Dish are much greater and more and more consumers are coming to this realization.
Dish Network’s EVP Marketing, Programming and Media Sales, Warren Schlichting, took the opportunity to knock CBS All Access, saying in the company’s blackout release, “On top of free availability with our antenna, the fact that CBS makes its content available a la carte on a streaming app has further eroded the value of its content for Dish and our customers.”
It is refreshing to see an operator address the cannibalization effect we at Faultline Online Reporter have spoken so much about, but we struggle to see how Schlichting believes CBS All Access is eroding the value of pay TV channels, but that its own Sling TV is not eating away at its traditional TV business in a similar way.
“Switching to OTA-delivered locals can unlock savings annually for Dish customers. Customers will see the local channels and show information for the most popular channels in the guide on the Hopper DVR, and can watch and record local channels using their Dish remote without switching inputs on the TV. We want to help customers with the choice to save money. Dish doesn’t save money, but consumers can,” said Schlichting.
The OTA TV offer from Dish came about after CBS rejected Dish’s revised contract extension offer, although negotiations are still ongoing. CBS claims it has attempted to reach a distribution deal for months, but Dish argues that the rise in carriage fees reflected an unfair bill increase on consumers, for channels with deteriorating viewership.
Schlichting added, “CBS is attempting to tax Dish customers on programming that’s losing viewers, tax Dish customers on programming available for free OTA, and tax Dish customers for content available directly from CBS. Our customers are clear: they don’t want to pay a CBS tax. It’s regrettable and unnecessary that CBS is bringing its greed into the homes of millions of families this Thanksgiving.”
The knock-on effect on consumers may be regrettable as ultimately Dish has to deal with the backlash, but it is a necessary evil for CBS to offset its declining advertising revenues as viewing figures in its popular channels CBS Sports Network, Pop and Smithsonian Channel have dropped 10% in the past three years. While CBS has differentiated by being the first US broadcast TV network to roll out its own streaming service with CBS All Access, the margins here so far are lower than those company is used to from carriage fees.
Dish cites data from SNL Kagan showing that blackouts are being caused by the rise in broadcast fees, which are forecast to reach $9.3 billion this year, rising 18% from last year, and on to $12.8 billion by 2023.