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updated: 3/4/2014 3:08 PM

Dish gains web rights to Disney TV shows in multiyear agreement

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Bloomberg News

Dish Network Corp. reached a groundbreaking agreement to carry Walt Disney Co. programming, gaining rights to offer Disney, ABC and ESPN shows over the Web in addition to its satellite pay-TV service.

The multiyear deal, which also ends legal standoff between the companies over Dish's AutoHop ad-skipping technology, is the first between Disney and a pay-TV provider to include so-called over-the-top program rights. It will allow Englewood, Colorado- based Dish to offer Disney shows as part of a future Web-based subscription-TV service.

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"The creation of this agreement has really been about predicting the future of television with a visionary and forward-leaning partner," Joseph P. Clayton, Dish's chief executive officer, said in a statement yesterday. The deal creates "a model from which to deliver exciting new services tomorrow."

In signing Disney, Dish and its chairman, Charlie Ergen, gain a head start against other pay-TV providers contemplating selling monthly programming packages over the Internet. Such products would break cable-TV companies free of their geographic boundaries, and allow satellite systems such as Dish to offer interactive features their services now lack.

Phones, Tablets

With the Disney agreement, Dish customers will have access to shows via televisions, smartphones, tablets, game consoles and other connected devices.

Dish, the second-largest U.S. satellite-TV service, and Disney, the largest entertainment company, reached the deal after months of negotiations. As part of the accord, Dish will delay the availability of its AutoHop feature, which lets customers skip ads on recorded programs on the broadcast networks.

AutoHop will now be available three days after the original broadcast. Previously it was available after 24 hours. The three-day window is important to broadcast networks because they can sell advertising based on the extended viewing, Disney Chairman and Chief Executive Officer Robert Iger said in a conference call last month.

"We knew early on we had a responsibility with this deal to not only do what was best for our business, but to also position our industry for future growth," Anne Sweeney, co- chairman of Disney's Media Networks division, said in the statement.

AutoHop Lawsuit

The deal is the first content renewal for Dish with a major television network since it launched AutoHop, Drew Crum, an analyst with Stifel, Nicolaus & Co., said in a research note. It provides opportunities for incremental revenue at Disney and removes the risk of a blackout, said the analyst, who recommends buying Disney stock.

AutoHop, introduced in May 2012, embroiled Dish in litigation with ABC, CBS Corp., Comcast Corp.'s NBC and 21st Century Fox Inc.'s Fox over the feature. The deal announced yesterday dismisses the litigation between Disney and Dish.

Dish was little changed yesterday at $58.88 in New York trading. Disney, based in Burbank, California, fell 1.7 percent to $79.46.

Top Stories:TOP--With assistance from Scott Moritz in New York. Editors: Anthony Palazzo, Stephen West

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzobloomberg.net

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