The long dreamed-of arrival of Internet TV has moved much closer to reality. The recent groundbreaking deal between the Walt Disney Company (NYSE:DIS) cable network and the satellite TV provider Dish Network (Nasdaq:DISH) could lead to substantial changes in the way we watch television, and it could happen sooner than we think.

The Englewood, Col.-based Dish is now the second-largest provider of paid TV in the U.S., and has a subscriber base just over 14.1 million. The Burbank, Calif.-based Disney is, of course, a household name. The groundbreaking deal will allow Disney programming like WatchABC, WatchDisney and WatchESPN to be streamed on-demand to Dish Network's subscribers via Internet connected devices.

The next generation of TV looks like a combination of two service models – cable providers would continue to offer a bundle of channels, but they would be streamed via the Internet to any and every screen. This has spawned a new industry buzzword: “over the top” – the delivery of video, audio and other media on top of traditional cable TV service, over the web and without a cable provider involved in the control or distribution of content. Also, the service will likely be delivered without cable boxes or satellites.

Dish has not announced a timetable for the rollout of this new service, but it is clearly aiming straight at the so-called “cord-nevers,” the generation of young people, aged 18-34, who access most or all of their entertainment using only Internet-connected devices like computers and tablets. These young consumers have been a difficult demographic for traditional cable and satellite TV providers to capture, as they don't want to pay the high cost of most cable TV subscriptions.

Dish will reportedly charge between $20 and $30 per month for its planned offering, which is lower than most cable services; it's calling this a “personal subscription service.” For the present, it appears this would be a per-person charge, rather than a per-household charge. The service would need to be easy to use, work in or out of the home, and function equally well on both big-screen TVs and smart phones if Dish hopes to capture the cord-nevers.

On the Street

Given the continued overall strong outlook for Disney stock (based on revenue growth, earnings per share increases and indicators of continued strength across its five business areas) investors may want to consider taking a position for their portfolios. The stock is expected to continue its upward price movement for some time to come.

It's clear that Dish's program-carriage agreement with Disney was just the beginning. It may be seeking to merge with DirecTV (Nasdaq:DTV), another satellite provider. It was recently reported that Dish's Chairman, Charles Ergen, had contacted Michael White, CEO of the rival El Segundo, Calif.-based company. If a merger really is in the works, it would be the companies' second attempt; regulators blocked the first proposed merger in 2002. It's not clear whether regulators would block it again, or whether both companies have equal enthusiasm for another try.

However, based on some of the current numbers- increased revenue estimates for a Dish/DirectTV-combined company, a customer base that would immediately jump to 34 million subscribers and the prospect of dividend payments based on a higher combined cash flow– a merger might be a value-added play for investors.

What else may be coming?

One possibility creating lots of buzz: Cupertino, Calif.-based Apple Inc. (Nasdaq:AAPL) and Philadelphia's Comcast Corp. (Nasdaq:CMCSA) may be teaming up for a streaming television service of their own. It would use an Apple set-top box and get special treatment on Comcast's cables to ensure it bypasses congestion on the Web. The discussions are still in the early stages; but if a deal is made, it would mark a dramatically increased level of cooperation and integration between a technology company and a cable provider, modernizing TV viewing.

The Bottom Line

Past difficulties in negotiating deals like the one between Disney and Dish Network had been a major stumbling block to providing Internet TV in the U.S. However, now that this deal is done, it is expected to serve as a template for other companies to negotiate their own agreements. As far as the future of television? We can expect more convergence between TV and the Internet over time, bringing greater variety and flexibility in where and when we watch. Stay tuned, folks.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

Related Articles
  1. Personal Finance

    The Future Of The Television Industry

    More and more consumers are choosing to avoid cable providers and find alternative TV viewing options.
  2. Entrepreneurship

    Walt Disney: How Entertainment Became An Empire

    One of the most powerful companies in the entertainment sector has some lessons to share for new budding entrepreneurs.
  3. Personal Finance

    Media Mashup: Who Owns Whom?

    You'd be surprised by how many publications fall under the umbrella of one company. Discover the big media companies and what they control.
  4. Personal Finance

    Wall Street History: Disney, Kodak And Astor

    This week in financial history marks the opening of the happiest place on earth and much more.
  5. Active Trading

    Make Money On The Movies

    If you think you know which films will tank and which will soar, this new way to trade could be for you.
  6. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  7. Economics

    The Oscars and Golden Globes: Worth Their Weight In Gold!

    The Oscars and Golden Globes set off a wave of spending that creates new flows of funds in the economy and has major financial impact.
  8. Stock Analysis

    The Top 4 Companies Owned By Sony (SNE, ERIC)

    Learn how Sony Corporation became a leader entertainment. Music acts such as Beyoncé and movies such as "Spider-Man" are part of Sony's success story.
  9. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  10. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
RELATED FAQS
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How does horizontal integration allow companies to share resources?

    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center