Disney cable deal with Charter about rates dispute spills over to TVs as ESPN, ABC go dark. Walt Disney (DIS.N) and Charter Communications (CHTR.O) traded salvos over their unresolved distribution agreement after several channels including ESPN went dark on Thursday for customers of Charter’s Spectrum cable service.
Spectrum Cable customers had a rude awakening Thursday night. Instead of tuning into a marquee matchup between the Florida Gators and No. 14 Utah Utes on ESPN they were greeted with a screen alerting them that the channel had been removed. This was due to Disney and Spectrum negotiations for cable deal.
Disney and Charter agreement
Charter Communications, the parent company of Spectrum Cable, and Disney are currently in negotiations over access fees for cable deal.
The blackout was not limited to the game but to all Disney-owned channels as the company pulled channels from the carrier as a part of ongoing agreement negotiations over carriage fees for Disney’s suite of networks.
Disney pulled ESPN, ABC and other cable channels off Spectrum, which serves huge markets including New York and Los Angeles, in the middle of U.S. Open tennis coverage as well as other live sporting events including college football.
Disney cable deal
Charter flashed a message on screen that urged viewers to contact Disney. “We offered Disney a fair deal, yet they are demanding an excessive increase,” it read.
“The rising cost of programming is the single greatest factor in higher cable TV prices and we are fighting to hold the line on programming rates imposed on us by companies like Disney.”
Disney cable deal dispute is mainly over sports network ESPN, which does not have a streaming service. This is a big cable attraction despite losing subscribers each year to cord-cutting.
Disney and Charter agreement
On Friday Disney said it had offered Charter “the most favorable terms on rates, distribution, packaging, advertising and more”.
“Charter has refused to enter into a new agreement with us that reflects market-based terms,” Disney said in its statement about Charter distribution agreement.
Disney added that that it is ready to get back to the negotiation table about Charter distribution agreement and to restore access to content.
Charter said on Friday about its fight with Disney that ESPN was the “lynchpin” of its video business.
Opinions on Disney and Charter cable fight
“We’re very disappointed for our fans and viewers around the country that Spectrum and Charter could not resolve their dispute with Disney, resulting in a loss of ESPN coverage of Thursday night’s matches,” the United States Tennis Association said in a statement on Friday.
“We’re very hopeful that this dispute can be resolved as quickly as possible.”
Rosenblatt Securities said Disney might have “more to lose” than Charter in this cable deal. The institutional brokerage said Disney could lose billions in profits each year from its traditional TV business if an agreement with Spectrum about cable deal was not reached.
“An extended fight with Charter might accelerate Disney’s DTC (direct-to-consumer plans).” Analysts have said Disney has been reluctant to swiftly roll out a DTC plan for ESPN. This was as it needs cash from its profit engine to fund money-losing streaming service, Disney+.
Disney vs Charter
CEO Bob Iger said in July Disney wants to find a strategic partner for ESPN to form a joint venture or buy a stake to help take it directly to consumers.
“Charter and Disney are ideal partners to establish hybrid linear TV and direct-to-consumer model,” Richard DiGeronimo, Charter’s president for products and technology said on Friday.
The company, which serves more than 32 million customers in 41 states, has been paying about $2.2 billion in annual programming costs to the entertainment giant.
Stocks at closing
The company’s shares fell 2%, while Disney dropped 2.7%. Other media firms including Warner Bros Discovery (WBD.O) and Paramount Global (PARA.O) lost between 4% and 6%.
