It’s definitely a set-back for those who fantasized about such a service based on what we know from the wide-ranging program carriage agreement the companies announced last night. Dish and Disney logosMany industry watchers thought that someone might be able to compete with cable and satellite by charging a lower price for a package of Internet-delivered pay TV channels that didn’t include sports — the leading contributor to rising programming costs. The Dish-Disney deal is the first to publicly address the terms of a potential online, or over-the-top (OTT), service that Dish has been mulling (similar to what Sony and Verizon appear to be planning). And while Disney wouldn’t require the satellite company to offer all of its channels, it would insist on ABC, ESPN, ESPN2, ABC Family, and Disney Channel. That represents “the worst of all worlds,” MoffettNathanson Research’s Michael Nathanson says. A service that includes ESPN, but not regional sports channels, “has too many missing networks to appeal to families who care about sports and is too expensive to be differentiated for families who don’t. Time to shovel the dirt on this idea.” Bernstein Research’s Todd Juenger also says that the agreement only allows subscribers to a hypothetical OTT service to access one stream which means it’s “not suitable for a traditional household with multiple TVs/viewers.”

If anything, the deal strengthens the power of sports programmers to thrive with subsidies from non-sports fans. Among the channels that Dish agreed to add to its satellite line up are the Longhorn Network, SEC Network (for Southeastern Conference games), ESPN Goal Line, ESPN Buzzer Beater, and HD feeds of ESPNEWS and ESPNU. SEC Network is said to want as much as $1.30 per subscriber per month and the agreement with Disney “will likely put pressure on both Time Warner Cable and Comcast, who have not yet signed up and are the biggest operators in the SEC footprint,” Nathanson says. The bottom line? Dish’s outlays to Disney could increase by as much as 10% on a per-capita basis, Brean Capital’s Todd Mitchell estimates. Disney shares are +2.9% in early trading while Dish is +0.7%.