A dispute between
Disney
(ticker: DIS) and
Charter Communications
(CHTR), ultimately led to customers of the cable service Spectrum being cut off over the Labor Day holiday weekend.
Disney
said it was hopeful that Charter will be open to more conversations that will restore access to its content to Spectrum customers, in a blog post Monday.
Meanwhile, the media and entertainment giant has offered Spectrum users a solution—signing up for Hulu+ Live TV, which offers EPSN, ABC, Disney+ and other channels. Disney owns two-thirds of Hulu.
Disney said that Charter declined an offer to extend negotiations, which would have kept ESPN, ABC, and other Disney-owned networks available for customers, in separate a blog post Sunday. The company also said Charter wanted to give its customers free access to Disney’s streaming services.
“Even though Charter also claims to value Disney’s direct-to-consumer services, the cable company is demanding these different services free—which does not make economic sense,” Disney said in a blog post Sunday.
CEO Bob Iger has made returning Disney’s streaming business to profitability a priority, so giving it away free isn’t really an option. But Charter said Disney was insisting on “unsustainable price hikes.”
Charter said Disney wanted customers to “pay twice” to get content apps with the linear video they have already paid for. “This is not a typical carriage dispute. It is significant for Charter, and we think it is even more significant for programmers and the broader video ecosystem,” the company said in a statement Friday.
It added that it was expected to pay Disney more than $2.2 billion in 2023, excluding the impact of advertising.
Oppenheimer analysts said the dispute marked a “tipping point” for legacy TV, and a defining moment for Charter’s business. They said that media providers were transitioning to over-the-top (OTT) TV—meaning streaming content delivered over the internet—but expecting cable providers to keep paying the same amount for legacy TV.
“The linear TV business model is broken. The only thing that can save it somewhat longer term is by combining and bundling with OTT services,” they said.
“We expect Disney to agree to Charter’s terms, or Disney must move to over-the-top immediately, destroying legacy TV. This dispute alone is a $4 billion hit to Disney’s annual free cash flow, including advertising,” analysts, led by Timothy Horan, added.
“Disney/ESPN effectively wants to have its cake and eat it too as it makes the transition to streaming,” analysts at Lightshed Partners said in a note Tuesday.
They added that it “remains unclear” whether Charter is prepared to lose Disney networks permanently but that such battles usually end in an agreement being reached.
“If, however, including the streaming services at no extra cost is a ‘must-win’ for Charter, then we do not expect a deal to be reached anytime soon and the drop could, in fact, be permanent,” they added.
The streaming experience consumers enjoyed during the pandemic years is likely never to return.
Netflix
has introduced an ad-supported tier and scrapped its basic plan, while also cracking down on password sharing. Disney also announced higher prices last month.
The outcome of the dispute between Charter and Disney could be key in shaping the future of the industry, for its major players, and for consumers.
Right now, no one looks like a winner.
Write to Callum Keown at [email protected]
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