Where things stand – The Hollywood Reporter

Labor Day weekend — when families gathered for holiday barbecues and ESPN televised major sporting events like college football games and US Open tennis — executives at ESPN parent company The Walt Disney Co. and cable giant Charter Communications continued to have discussions about it ongoing promotion dispute keeping Disney’s channels off Spectrum, Charter’s cable television service.

So what’s the background again?

On Thursday, August 31, the Disney channels were pulled from the Spectrum TV service, which is owned by Charter Communications, the second largest cable television company in the US with about 14.7 million subscribers.

The channels were shut down because Disney and Charter could not agree on a new carriage agreement and the sides were so far apart that extending the negotiation time probably would not have been enough to secure a deal, leading to a current impasse. A source close to the talks told The Hollywood Reporter that, as of Sunday afternoon, there was a “great rift” between them.

Which channels are blocked and where?

Disney’s cable channels — particularly the ESPN networks — as well as FX, Disney Channel, Nat Geo and Freeform have been impacted across the Spectrum spectrum. Also affected are the ABC broadcast networks in regions where Charter is the cable provider and Disney owns the station. This includes New York City, Los Angeles, and Durham-Raleigh, North Carolina, three cities where Disney owns the local station (WABC, KABC, and WTVD, respectively).

What are the sticking points in the negotiations?

In most carriage negotiations, the two big issues are price (how much does the network operator pay per channel) and distribution (what percentage of its area is needed to have the channel in its package).

In this case, a source close to Disney says the main bone of contention is what role Disney’s streaming services should play. They say Charter wants Disney+, Hulu, and ESPN+ bundled without additional payment. Disney reportedly offered a number of options, which could include chartering the Disney services to its customers or bundling them with other offerings.

Charter, meanwhile, told Wall Street analysts that programmers like Disney have built their streaming services out of money from their linear channels and shifted programming investments from linear to streaming.

So the big obstacle is streaming. Will it remain an a la carte offering as it stands, or will Charter tie it to its linear offerings in some way? There are also some concerns about distribution and how widely Disney channels need to be available.

Are there other ways to get ESPN or ABC content?

Yes. Alternative cable providers exist in some markets, and satellite television services such as DirecTV or Dish are also an option. More and more consumers are opting for “virtual MVPDs” that offer pay-TV services over the Internet. The most popular vMVPDs are YouTube TV and Hulu with Live TV (which happens to be owned by Disney).

In fact, both Disney and Charter are pushing consumers toward vMVPDs. In an unprecedented move, Charter is urging some customers to consider Fubo, the sports-focused vMVPD, and offering a discounted plan for three months (yes, the cable company is offering customers to cancel their TV service).

Disney, late Monday evening, started a new consumer-focused campaign directing consumers to other options, including Hulu with live TV, also owned by the company.

Does Charter Spectrum offer discounts to its customers?

Yes, Charter Spectrum offers a $15 rebate to customers who call customer service. If the dispute drags on, it is possible that the offer will be expanded.

Are carriage deals always so controversial?

No. Most promotion negotiations are silent and complete without fanfare. Occasionally, disputes erupt in the press as the deadline approaches, and only very rarely are channels removed from the television schedule.

Disney has been involved in a handful of promotion disputes over the past two years. Last October, Disney networks, including ESPN and ABC, kept satellite TV service Dish Network and its streaming offering Sling TV under wraps in a similar dispute. The channels were offline for a few days before the companies reached an agreement.

And in late 2021, the Disney channels on YouTube TV were dropped but also returned after reaching an agreement within days.

In a highly unusual move, Charter executives held a conference call with analysts after the blackout began and told Wall Street that they had reached the “point of indifference” on whether to stay in the video business or exit it. “We are on the edge of a precipice. Either we move forward with a new collaborative video model, or we move forward,” said Chris Winfrey, Charter CEO.

As a result, Charter says it may exit the pay-TV business. is that a thing Have other cable operators stopped offering TV?

Yes. Earlier this year, cable provider WOW!, which operates in parts of the Midwest and South and has just over 500,000 subscribers, ceased offering TV services and shifted its TV subscribers to YouTube TV. And last year, Frontier Communications, which operates in a few markets across the country and also had about 500,000 TV subscribers, stopped providing its TV service and shifted its TV subscribers to YouTube TV.

Altice, which has approximately 2.4 million pay-TV subscribers, including those in the lucrative and populous suburbs of New York City, has publicly explored opportunities for its TV business but has not yet agreed on a formal plan.

Will this deal have an impact on the broader entertainment and media landscape?

Yes, many TV providers have a most-favoured-nation clause that allows them to take advantage when a competitor makes a better offer.

But perhaps more importantly, this deal has the potential to dramatically transform both the pay-TV and streaming ecosystems. As streaming becomes more integrated into the package, Charter says it will push for similar moves at other companies that operate both streaming services and pay-TV channels. If Charter pulls out of the TV business entirely, it will likely result in millions of households abandoning the pay-TV package and potentially hasten its demise as other, smaller TV providers follow suit.

The result will likely be far less spending on content from media and entertainment companies, including sports and original programming.

“The collateral damage could be far-reaching: from sports leagues whose rights flow from the renewal, to affiliated local television networks looking for material reinforcements, to creative talent connected to linear networks’ programming investments,” the MoffettNathanson analysts say Michael Nathanson and Craig Moffett an analyst report on Friday.

“The stark reality is that the media and distribution landscape has been built up over many years to this day. “Every media company shares some of the blame,” they add, while Wells Fargo analyst Steven Cahall called the dispute a “settlement” for the media business.