The Disney-Charter carriage dispute was set up as potentially apocalyptic for both sides. Charter, which provides cable services under the Spectrum brand and had almost 15 million subscribers there before this began in late August, was looking at moving on from Disney-owned channels (including ESPN and ABC) “permanently” without a deal as per their executives’ comments. They had proposed a radically different “glide path” model around a transition to direct-to-consumer subscription services that could have had wide industry impacts on other multichannel video programming distributors.
Meanwhile, while claims that ESPN would go “bankrupt” without Spectrum subscribers were always absurd by the numbers, those were advanced by some widely quoted figures. And there was no denying that a permanent Charter loss would have been a major blow to ESPN’s existing linear model and might have had further knock-on effects for other MVPD carriage deals with Disney. The stakes were high here for ESPN as well, and that was reflected in how aggressively they deployed their personalities, including Stephen A. Smith. But in the end, the deal struck Monday to end that 12-day dispute seems to have provided each side some of what they wanted without necessarily transforming anything.
Here’s more on it from a joint ESPN-Charter press release:
In a joint statement Robert A. Iger, Chief Executive Officer, The Walt Disney Company, and Chris Winfrey, President and Chief Executive Officer, Charter Communications said:
“Our collective goal has always been to build an innovative model for the future. This deal recognizes both the continued value of linear television and the growing popularity of streaming services, while addressing the evolving needs of our consumers. We also want to thank our mutual customers for their patience this past week, and are pleased that Spectrum viewers once again have access to Disney’s high-quality sports, news and entertainment programming, in time for Monday Night Football.”
Among the key deal points:
- In the coming months, the Disney+ Basic ad-supported offering will be provided to customers who purchase the Spectrum TV Select package, as part of a wholesale arrangement; ESPN+ will be provided to Spectrum TV Select Plus subscribers;
- The ESPN flagship direct-to-consumer service will be made available to Spectrum TV Select subscribers upon launch and;
Charter will maintain flexibility to offer a range of video packages at varying price points based upon different customer’s viewing preferences.
- Charter also will use its significant distribution capabilities to offer Disney’s direct-to-consumer services to all of its customers – in particular its large broadband-only customer base – for purchase at retail rates. These include Disney+, Hulu and ESPN+, as well as The Disney Bundle.
So, for the moment, the deal means Charter gets some of the “free Disney streaming apps” they had lobbied for, but not all of them. They only get to provide ESPN+ for free in a higher tier than their normal tier, and while that basic tier now comes with Disney+, that’s the ad-supported version. And they get no discount on Hulu.
But Charter does get to pull a lot of Disney channels that do have programming duplicated on Disney+ and Hulu, including Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo. And they get to offer that linear ESPN DTC service when it launches in 2025 or 2026 (although, there’s as yet been no mention of that service offering anything more than linear ESPN, which Charter already offers under this deal). And they get unspecified “flexibility” on video package range, which could presumably let them offer cheaper packages without ESPN and/or some of its networks (similar to what they’ve done with entertainment-focused packages without RSNs and league networks).
Meanwhile, ESPN networks and ABC are now back on Charter, and they get to again add in those subscribers who haven’t yet canceled. And that’s a big boost for them on multiple fronts. Firstly, it boosts their income from per-subscriber fees, regardless of whether those subscribers ever watch anything on those channels. Secondly, it improves the household reach for ESPN and its networks. Thirdly, it jacks up the ratings (and thus, the advertising dollars) for ESPN broadcasts. So this is quite important for the futures of Disney and ESPN.
However, this is a deal that has some merits for both sides, but not one likely to transform the TV ecosystem (as some had expected it might). Both sides gave a bit, and both sides have some things to be happy with out of this. And this could pay further benefits down the road. Charter did get some of what they were looking for in terms of access to Disney OTT apps for their subscribers, and they and Disney could both benefit from Charter marketing the unincluded versions of Disney DTC apps to Spectrum subscribers.
And it’s notable that Charter has secured full ESPN linear DTC access for subscribers when that launches. While that’s currently worth next to nothing (it’s just the ESPN feed already being offered through their cable package, so this would just be an alternate way to watch it, and authentication-required web streaming is already a thing), it’s a useful hedge in case Disney tries to throw more exclusive content in there (ESPN++, anyone)? Meanwhile, Disney now has Charter and their subscribers (and their juicy per-subscriber fees) locked in for a while, helping them maintain their linear offerings while they try to ramp up their direct-to-consumer offerings.
But this deal alone is not going to blow up the existing model in favor of either side. It may well present a useful pathway for future carriage negotiations, and it certainly seems likely that other MVPDs may be able to get at least this level of OTT app access for their subscribers in future negotiations. But it’s not as radical a departure as people from either side had proposed. While that probably has some merit (the current model still has some benefits for programmers, distributors, and consumers, so an instant implosion carries problems for all), it does mean this deal alone isn’t going to be the watershed some had expected.