On Sunday, Disney-owned channels – including ESPN, ABC, Freeform, FX and National Geographic – went dark on DirecTV, as carriage negotitations between the media giant and pay-TV distributor fell through. The blackout saw almost 11 million US homes lose access to the channels in the middle of ESPN’s US Open coverage, and before kickoff in a highly anticipated college football game.
The impasse follows weeks of discussion between the firms over payment terms for carrying the Disney channels. With no agreement in place at yesterday’s deadline, the channels went dark on DirecTV. And with the new NFL season due to begin this week, the pressure is on the satellite distributor to resolve the dispute.
But DirecTV accuses Disney of unreasonably raising its prices, while Disney claims its terms are the same for all distributors.
“Disney is in the business of creating alternate realities, but this is the real world where we believe you earn your way and must answer for your own actions,” Rob Thun, Chief Content Officer at DirecTV, said in a statement. “They want to continue to chase maximum profits and dominant control at the expense of consumers — making it harder for them to select the shows and sports they want at a reasonable price.”
“While we’re open to offering DirecTV flexibility and terms which we’ve extended to other distributors, we will not enter into an agreement that undervalues our portfolio of television channels and programs,” Disney responded. “We urge DirecTV to do what’s in the best interest of their customers and finalize a deal that would immediately restore our programming.”
Deadline day
The blackout follows last year’s carriage dispute between Disney and Charter Communications, which caused a 10-day blackout of Disney channels on Charter’s pay-TV platform.
The trend stems from the ongoing transition to streaming, which has essentially gutted the pay-TV model. In Q1 alone this year, the US lost 2.4 million pay-TV homes, according to MoffettNathanson, representing a 12 percent YoY decline.
And DirecTV has been hit particularly hard by cord-cutting, haemorrhaging more than half its subscribers over the last decade. As a result, US telco AT&T spun-off the business in 2021, and has reportedly been looking to sell its remaining 70 percent stake in the firm.
That decline has had a knock-on effect on TV companies, which charged pay-TV distributors billions of dollars in carriage fees to air their channels, based on the number of subscribers on the pay-TV platforms. With those subscriber numbers in freefall, Disney is looking to raise its fees – but with less susbcription money coming into the pay-TV companies, the numbers appear to have stopped adding up.
This is proving particularly problematic for ESPN, which is considered the most expensive basic cable channel for distributors, due its expensive contracts with the NFL and NBA. Live sport remains one of the few draws available on pay-TV channels, and Disney reportedly charges distributors almost $10 per month per subscriber home to carry the sports channel.
Fat bundles
At the same time, bundling requirements continue to place added pressure on TV platforms. Last month, a US judge blocked the launch of Venu Sports, the sport streaming joint venture (JV) between Disney, Fox and Warner Bros. Discovery. FuboTV, a rival sports streaming serivce, argued that bundling clauses in contracts effectively force Fubo and other platforms to pay for unwanted non-sports channels. These costs are then passed on to the consumers, who rarely watch the non-sports channels. The judge ruled that Venu Sports sees its owners lift those bundling clauses for their own streaming offering.
DirecTV has also accused TV networks of forcing unwanted channels on distributors, by including non-sports channels as a mandatory condition for carrying highly valued content, such as ESPN. In August, DirecTV’s Rob Thun said in an open letter that these clauses prevented the company from offering cheaper plans, such as a sports-only offering, which would help stem losses among customers unwilling to pay more than $100 per month for over 100 TV channels.
“These antiquated requirements force pay-TV customers to subscribe to many channels they may not watch, which have yielded ‘fat bundles’,” said Thun. “At the same time, programmers have reserved flexible genre-based offerings solely for themselves, eroding the price-value proposition for pay-TV customers by shifting the best programming to DTC services while raising programming fees on pay-TV. Venu, the recent joint venture across multiple programmers, is a perfect example.”
The company also revealed yesterday that the entertainment giant said DirecTV must “agree to waive all claims that Disney’s behavior is anti-competitive” in order to secure a carriage agreement. “Disney’s last-minute demands to foreclose upon any legal accountability for its growing pattern of anti-competitive actions should be troubling to all pro-consumer advocacy groups, regulators, and Department of Justice attorneys alike,” said the pay-TV company.
Thun added that Disney’s ongoing transition to its own DTC services is making customers pay multiple times for the same content on numerous platforms. “Disney’s only magic is forcing prices to go up while simultaneously making its content disappear,” he said.
