NEW YORK - Dish Network Corp. is talking to networks such as Viacom's MTV about offering their channels over the Internet, a service that could shift the economics of the pay-TV industry, five people familiar with the plan said.
In addition to Viacom, the negotiations involve the Spanish-language broadcaster Univision Communications and Scripps Networks Interactive Inc., owner of the Food Network and HGTV, said the people, who asked not to be named because the talks are private. The companies would offer an online product known as an over-the-top service, charging a lower price for a smaller bundle of channels viewable on a computer or tablet.
Dish's service would change the dynamics of the pay-television business, breaking up the bundles that force customers to pay for channels they don't watch. It also gives Dish a way to avoid its biggest programming expense: sports. Walt Disney Co.'s ESPN gets as much as $5.13 each month for every cable and satellite subscriber, compared with the industry's average of 26 cents, according to SNL Kagan.
"That's when you could start seeing a few cracks in the ecosystem," said Alan Gould, a media analyst at Evercore Partners in New York. "The addition of an over-the-top service would be significant."
The effort would mark the biggest attempt to create an online service with live cable channels, a break from the approach taken by Netflix and Hulu. For Dish, the move would decrease its reliance on its satellite-TV service, which ranks second to DirecTV in U.S. customers. It also gives it a way to undercut pay-TV competitors on price.
Cable networks, meanwhile, have been reluctant to break up their suite of channels and sell them a la carte because it would lower the amount of available advertising inventory. Viacom and other cable networks typically sell ads at a lower rate than the big broadcast networks such as CBS, so they rely on volume.
Viacom would be willing to sell smaller bundles of its networks, which also include Nickelodeon and Comedy Central, at a higher rate per channel than it does for its full complement of programming, according to two executives familiar with the situation.
Bob Toevs, a spokesman for Englewood, Colo.-based Dish, declined to comment. Mark Jafar, a spokesman for New York-based Viacom, also declined to comment, as did Mark Kroeger at Scripps and Matt Biscuiti at Univision.
A central question is whether consumers want smaller bundles that lack sports programming. Several pay-TV operators, including Dish and Time Warner Cable Inc., already offer cheaper packages that don't include sports. Those offerings aren't very popular, said Amy Phillips, a spokeswoman for ESPN, the biggest cable sports network. "History shows that very few households subscribe," she said.
Dish offers a $20-per-month satellite package without ESPN, though it also lacks other top channels such as MTV and HGTV. Cable and satellite companies have agreements with ESPN that require the video distributors to include the sports network in their most popular tier of TV service.
Dish Chairman Charlie Ergen, who co-founded the company, has said there will be a day when a pay-TV operator chooses not to include sports in order to charge $10 to $20 per month less than competitors.
"My mom doesn't watch sports," Ergen said during a conference call last month. "I've got neighbors who don't want sports. I've got friends who go to the bars or the neighbors' house to watch sports."
Dish's plan would go beyond the constraints of the so-called TV Everywhere initiative, already adopted by most of the major networks. Programmers such as CNN and HBO, both owned by Time Warner Inc., offer the option to people who already pay for television, letting them watch those same channels on their phones, tablets and personal computers.
Time Warner Chief Executive Officer Jeff Bewkes has said it wouldn't make sense to sell HBO directly to the 6 percent of homes in the U.S. who don't have cable or satellite service.
"There are some of those people that if you sign them up, they would die the next day - these are people that are old," he said at an investor conference last week.