Some media executives have long warned that a real war would one day break out between big cable and Hollywood and reshape the future of pay TV as we know it.
After years of escalating tensions, the battle began on Friday, pitting Charter Communications Inc., the second-largest U.S. cable company, against media giant Walt Disney Co. At midnight, Charter Communications’ 14.7 million TV subscribers lost access to ABC after the two sides could not agree on a new multi-year programming deal. ESPNand other Disney-owned channels, including coverage of this weekend’s US Open tennis tournament.
Neither side appears ready to back down. ESPN took to social media to alert Charter customers that the network had been removed from their lineup and provided a link to more information. Charter, which offers television service under the Spectrum brand in cities including New York and Los Angeles, sent out its own notice to customers and held an impromptu conference call with investors early Friday.
“We’re on the brink,” Charter Chief Executive Chris Winfrey said on a conference call. “Either we move forward with a new collaborative video model, or we move on.”
Entertainment and cable stocks tumbled. Disney, whose business includes theme parks and cruise ships, was down 2.4 percent at the close in New York on Friday. Warner Bros. Discovery down 12% and Paramount GlobalShares of CBS parent company fell 10%. Charter fell 3.6% ComcastThe No. 1 cable provider fell 2.2 percent.
Disney’s revenue is estimated to be $4 billion, including distribution fees and advertising. Bloomberg information. But for the broader media and pay-TV industry, the stakes may be greater, according to analysts. Lightshed Partners LLC Who called it a “watershed moment”.
Winfrey saw this coming.Seven years ago, Charter’s CEO warn Consumers are increasingly revolting against soaring pay-TV rates, especially high prices for sporting events that many consumers never watch. According to Bloomberg Intelligence, the current average monthly cable bill is about $126. Winfrey called on major media companies such as Disney to allow Charter to package channels to slow the loss of streaming viewers.
“It’s still not easy to put together compelling small packages, and it’s not in the interests of large programmers to let that happen,” Winfrey said.
Financial disputes between media companies and their cable partners are nothing new, and consumers often suffer from outages.customer of live tvfor example, cannot see stations owned by Nexstar Media Group Inc. In the past two months, missed from foxCBS and NBC.
But the battle between Charter and Disney looks bigger. Cable churn has accelerated in recent years, with the industry shrinking from a peak of more than 100 million subscribers to about 70 million.
That has prompted Disney and its chief executive, Bob Iger, to rethink the company’s longstanding commitment to traditional cable and broadcast programming.
Iger made this clear at a conference of media and tech executives in Sun Valley, Idaho, in July.he said disney explore options Bypass the cable provider and sell ESPN directly to consumers (possibly through a partnership). He also asserted that traditional TV networks may not be core assets and raised the prospect of selling ABC and the company’s non-sports cable channels.
Disney has been investing heavily in its own direct-to-consumer streaming services — Disney+, ESPN+ and Hulu — as alternatives to its vast entertainment library.
Winfrey, who worked in Europe earlier in his career, where customers typically pay for individual sports packages, seems to have been preparing for a showdown with Disney.Both a charter and an industry leader Comcast recently introduce A lower cost cable package with fewer channels than a standard subscription package and the industry’s first cable package not to include Disney ESPN.
Starting this month at the earliest, Charter will provide Two tier TV packages. One, called Spectrum Select Plus, offers an extensive lineup of sports events, including local regional sports networks. The other, called the “Spectrum Select Signature,” does not include sports. Charter also plans to launch a streaming service for its customers that will include regional sports networks as an alternative to cable service.
Disney is asking for an increase in the roughly $2.2 billion in annual subscription fees it receives from Charter. Charter wants Disney to lower the minimum number of subscribers it must pay so it can offer more packages that don’t include sports.
Charter also asked Disney to allow it to offer free streaming services like Disney+ and Hulu to premium cable customers, arguing that much of that content is made for traditional TV viewers, according to people familiar with the matter, who spoke on condition of anonymity. For consumers who only use Charter to access the internet, the company hopes to offer Disney’s streaming service under a revenue-sharing agreement.
The clock is ticking. On the one hand, Disney is working on a new video strategy that could include offering ESPN through an online subscription service. The company also faces a pause in film and television production due to a strike by Hollywood actors and writers.
On the Charter side, TV subscribers woke up Friday without popular channels like ABC or ESPN. With the college and NFL seasons underway, they could soon face a suspension of football games.
“The harsh reality is that the media and distribution landscape has been shaping up over the years,” analyst Craig Moffett of MoffettNathanson Research wrote in a research note. “Now more than ever, Clearly, there is no turning back. The lifeboat has been burned.”
— With assistance from Gerry Smith
Svlook
