5 Key Issues in HBO's Feud With Dish Networks
A standoff over carriage fees comes months after the network was acquired by AT&T, raising questions at play in the DOJ's appeal of the Time Warner megamerger.
HBO went dark Nov. 1 for Dish TV's 10.6 million satellite and streaming subscribers after the two companies failed to extend a carriage deal. While impasses in licensing negotiations are nothing new in the TV industry, this situation marks the first time in history that HBO has disappeared from a distribution service, mere months after AT&T closed its $81 billion Time Warner megadeal. Here are five questions arising from the standoff.
1. Did the Justice Department botch the AT&T merger trial? The U.S. government attempted to stop the merger between AT&T and Time Warner (now WarnerMedia, led by CEO John Stankey) on the theory it would harm competition. But when the trial came, the Justice Department backed away from alleging that AT&T would deprive a distributor like Dish access to a network like HBO.
Instead, the government focused on pricing models, with the suggestion that AT&T would be more inclined to tolerate blackouts in order to win fee increases. The judge didn't buy the economic logic. The Justice Department may have had a stronger case if it focused more squarely on the possibility that AT&T had the incentive and ability to keep content away from rivals of subsidiary DirecTV like Dish.
2. Will the HBO-Dish impasse impact the ongoing deal? It shouldn't. The appeals court is only looking at the trial court record to determine any errors in judgment. What happened afterward is technically outside the four squares of the review. Nevertheless, government lawyers may attempt to sneak in word of the standoff during the Dec. 6 appellate hearing.
3. What happened to Time Warner's arbitration offer? In response to the government's suggestion that there would be more blackouts because of the AT&T merger, Time Warner offered to engage in "baseball-style" arbitration with any distributor. Each side would then submit proposals on licensing terms, and an arbitrator would choose the fairest deal. Upon the blackout, Dish nodded to the arbitration offer. WarnerMedia declined comment about this. Of course, if the parties are in arbitration, it wouldn't necessarily be publicly announced.
4. Does the standoff hurt Dish? The Colorado-based company has a history of engaging in hardball licensing negotiations with TV networks because its business model has always been about the ability to advertise low cost for consumers. But maybe there's even more to the decision to ditch HBO. After all, Dish has spent months without Univision after the expiration of its deal with the Spanish-language programmer June 30. Dish may see its future in streaming skinny bundles of live programming via its Sling service, and the strategy could be to figure out what is most complementary to SVOD services such as Netflix and Disney's upcoming service.
5. How about HBO? The network likely won't incur too much economic pain by losing its place on Dish. First, according to testimony during the merger trial, Dish did an especially poor job at signing up HBO subscribers compared to other cable and satellite companies. And second, cord-cutting continues to accelerate, with HBO Now a viable alternative for most viewers of the premium cabler's offerings. Thus, many Game of Thrones fans — even Dish customers — may not be bothered by the standoff.
This story appears in the Nov. 7 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.