DISH-Sinclair Stall Blackout; Long-Term Deal on Track
After the Federal Communications Commission (FCC) intervention, satellite TV operator DISH Network Corp. DISH and leading local TV broadcaster Sinclair Broadcast Group Inc. SBGI finally agreed in principle to sign a long-term deal concerning the retransmission of the latter’s TV stations on DISH’s distribution network.
For now, the two companies have reached a stopgap agreement of two weeks, which ends the blackout of Sinclair’s 129 local TV channels in 79 markets across 36 states and the District of Columbia on DISH’s network. Notably, according to Variety, this was the largest-ever TV blackout of stations in the U.S. history, from a retransmission contract disagreement.
On Aug 15, 2015, DISH filed a complaint with the FCC against Sinclair, accusing the latter of failing to come to amicable terms with regard to the contract. DISH claimed that Sinclair had declined to talk on retransmission of its TV stations unless DISH lets Sinclair negotiate for 32 stations, which are not owned by the TV broadcaster.
Nonetheless, a last minute temporary agreement between the two companies had earlier helped avoid the blackout of Sinclair’s TV channels on DISH’s network. The temporary agreement allowed DISH and Sinclair to continue negotiating in terms of a new retransmission agreement to replace the existing deal.
Accordingly, DISH had asked the FCC to hold off any action on the complaint. However, despite this, on Tuesday, Sinclair withdrew signals of 129 local TV stations in a bid to negotiate a carriage agreement for some unrelated cable channels that it hopes to acquire in the future but does not own as yet. As a result, more than 5 million of DISH customers were affected.
Notably, on Wednesday morning, DISH reinstated the complaint. However, now that an agreement has been reached and the two companies are in the process of finalizing the terms of the deal, DISH has once again asked the FCC to postpone any action on the complaint.
Like other pay-TV operators, DISH has been persistently losing video customers. At the end of the second quarter of 2015, DISH had roughly 13.932 million pay-TV subscribers, down 0.9% year over year. Average monthly pay-TV subscriber churn rate in the second quarter stood at 1.71% compared with 1.66% in the prior-year quarter. Thus, a failure to strike a long-term agreement with Sinclair might have resulted in further customer churn and declining average revenue per user (ARPU) for DISH in the coming quarters.
Notably, this is not the first time that DISH has been in a tussle with content providers. In Dec 2014, an extended contract renewal dispute between DISH and CBS Corp. CBS had resulted in a short programming blackout in 18 local markets around the country. In the same vein, in Oct 2014, DISH had a contract dispute with Time Warner Inc. TWX, which resulted in the latter dropping many popular Turner broadcasting channels. However, both the deals were renewed later on.
DISH presently has a Zacks Rank #2 (Buy).
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