HBO, which boasts such premium programming as “Game of Thrones,” “Silicon Valley” and “Last Week Tonight With John Oliver,” has long maintained amicable relations with its distribution partners because it relies on them to help market its channels.
But now HBO has a new corporate owner — AT&T — which also owns Dish’s biggest competitor, DirecTV. The dispute centers on how much Dish Network Corp. will pay to carry HBO and Cinemax. The blackout affects about 2.5 million of the 13 million Dish customers, including those who subscribe to Sling TV, and creates a public relations nightmare for AT&T.
In the language of Chapter 16, it is the alternatives to agreement that determine the terms of agreement. If HBO fails to reach agreement with Dish, some Dish subscribers will switch to DirecTV, and this changes the profit caluclus of the merged firm (HBO+DirecTV). Now that has a better outside alternative to reaching agreement with Dish, i.e., distributing HBO through its own captive distributor, it can command a better deal with Dish.
Dish is resisting giving the merged firm a bigger share of its profit pie, and is hoping that it can bring pressure to bear on HBO to accept the old smaller slice of the profit pie.
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