Market Insight

Dish and Netflix reach agreement for set-top access

December 17, 2014  | Subscribers Only

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Dish becomes the first major pay TV operator to bring Netflix to its set-top box, further cementing Netflix status as a premium channel. Starting 17 December, Netflix became available to Dish customers through an app on second-generation Hopper whole Home HD DVR.

With Netflix integration, Dish customers will be provided with a seamless experience between Netflix and Dish content. It will provide a smoother experience for subscribers of each service, with no need to switch input, devices, or change remotes, helping to put the Hopper in the center of the TV viewing experience. Dish expects the Netflix app to appear on Joey, Super Joey and Wireless Joey clients in the coming months.

Dish’s move follows a string of partnerships Netflix have made with smaller cable operators through 2014. Netflix has already been available to smaller pay TV operators through their TiVo power set-tops (see: Mid-tier cable operators endorsee Netflix). Netflix became true to its word when in its Q1 2014 letter to shareholders, it stated that Netflix integration on non-TiVo set-tops were coming down the road and its appearance on the Hopper is the first fruition of that. With the majority of major Pay TV operators having an advanced flagship Whole Home HD DVR device, it remains to be seen where else Netflix may appear on.

Our analysis

As IHS predicted in June of 2014, Netflix has struck its first non-TiVO pay TV operator carriage deal with Dish network. The deal is significant because it means that DISH/Netflix subscribers won't have to turn to the likes of a Roku box or Xbox to stream the popular service on the main TV in the home. Again it is a validation of our supposition that Netflix is indeed becoming the 5th premium TV service, following in the footsteps of HBO, Showtime, Starz, and EPIX.

The terms of the deal were not made public, but a couple of scenarios seem to make sense. First, Dish who has been involved in a string of contentions negotiations with its programming partners recently, CBS and now FOX, may be carrying Netflix in order to cement customer loyalty without a fee involved. Secondly, Dish and Netflix may have struck a revenue sharing deal similar to that with other premium cable networks. 

If the first scenario were true the move by Dish would be a no cost solution to generate good will among subscribers who are being pressured by the company's resistance to carriage fee increases. Given Dish's recent spate of disputes it makes sense that the company would provide as many service enhancements as possible.

Secondly, if the two companies were to do a revenue sharing deal it could be an opportunity for Netflix to reach - at a significant discount - a population of subscribers who will generate some amount of extra income.  

For years Dish has been at the forefront of technology, it's integration of Sling Technology into its TV Everywhere solution, and with the Hopper DVR and its Autohop, Primetime Anytime, Virtual Joey, and now Netflix integration. Regardless of the cool features that it offers it's subscribers, Dish can't afford to lose carriage for a major channel group. That's why we believe that an agreement was struck with CBS so shortly after its channels and stations went black. It is likely that the current dispute with 21st Century Fox will also be settled without losing permanent carriage.

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