The ongoing dispute between Disney and Charter Communications is heating up as tonight’s Monday Night Football kickoff poses a pressing deadline.
The disagreement concerns negotiations with Charter’s Spectrum cable service, which carries ESPN in New York and Los Angeles. The telco pays around $2.2 billion in annual programming costs to Disney, but claimed that the entertainment giant is “demanding an excessive increase.”
When negotiations stalled at the start of the month, Disney pulled ESPN, ABC and other cable channels from Spectrum. Charter maintains that it “offered Disney a fair deal,” and said as much in an on-screen message to subscribers: “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.”
With the companies still locked in stalemate and the start of the NFL’s Monday Night Football fast approaching, Spectrum subscribers in New York and L.A. look likely to be disappointed – not least because tonight’s game is between two New York teams, the New York Jets and Buffalo Bills. And while Buffalo residents can watch the match on Spectrum via non-Disney local channels, New York City customers are beholden to the Disney networks.
The US Open has also been affected, drawing complaints from tennis stars left unable to watch the tournament in which they were competing. ESPN has no standalone streaming service, and the players staying in hotels relied on Spectrum’s cable service to follow the Open, only to find the channel going dark. Disney reportedly offered them free access to ESPN as a result of the blackout.
The same courtesy has not been extended to 15 million Spectrum subscribers, though Charter did offer them trial discounts on the Fubo streaming service, which also carries Monday Night Football.
The streaming racket
Though carriage disputes are fairly commonplace, this disruption is significant for exposing the tension between traditional pay-TV packages and the shift towards streaming. In the US, around 25 million cable subscribers have cut the cord over the last five years. And live sports is arguably one of the last remaining selling points of linear TV, especially given the absence of an ESPN streaming service.
But Charter argues that rising content costs are passed onto consumers, which in turn accelerates cord-cutting. “[Disney] are trying to force our customers to pay for their very expensive programming, even those customers who don’t want it or worse, can’t afford it,” the telco said in a statement. “The current video ecosystem is broken.”
And Disney is seeking to gain advantage by drawing cable customers affected by the blackout to its streaming services. The media giant announced a discount for its Hulu + Live TV package, a streaming bundle that includes access to the US Open and NFL games.
The company maintains that it offered Charter “the most favorable terms on rates, distribution, packaging, advertising and more,” and that it “stands ready” to resolve the carriage dispute. The business relies on Charter’s billion-dollar payments to shore up its loss-making streaming division, hence its reluctance to launch an ESPN streaming service.
But the ongoing dispute could accelerate those plans, as Disney seeks strategic partners to take ESPN direct-to-consumer. Subscription fees may not compensate for the money it makes from firms such as Charter, but partnering with a telco could create a hybrid sports business that straddles streaming and live TV.
Charter even suggested the telco could make that play. “Charter and Disney are ideal partners to establish hybrid linear TV and direct-to-consumer model,” said Richard DiGeronimo, President, Product and Technology at Charter Communications.