Cable giant Charter Communications and content giant Disney are fighting over programming costs of around $2 billion, but the price tag for their battle for the media industry in general could be much higher.
Disney on Thursday pulled its popular TV networks, which include ESPN, ABC and Disney Channel, from Charter’s Spectrum cable service, which reaches nearly 15 million homes, including many big markets like New York City and Los Angeles. The companies say the problem is Disney’s interest in seeking higher prices versus Charter’s desire for more flexibility in the way it packages Disney properties. Charter also wants to offer Disney streaming services like Hulu and Disney+ at no additional cost to its customers — a step from That would erode some of the new business Disney gained through these iconic centers.
Such skirmishes occur frequently in the media space, and they have become more apparent as content companies and their distributors scramble to keep revenue locked in while consumers move to streaming outlets. Charter estimates it pays Disney about $2.2 billion a year in fees for its programming, but when subscribers are willing to cut the cord and go live, any new highs threaten the remaining base.
The charter may not get everything it seeks, but its demands are likely to reverberate elsewhere. “The future of the Charter/Disney negotiations has significant implications for the rest of the industry other than Disney,” analysts from Moffett-Nathanson Research said in a note Friday.
One of the biggest sticking points in the discussions, according to a person familiar with the matter, is the idea of not giving Disney’s streaming services any additional value, while making them available to a wide range of Charter subscribers. Disney has certainly created a whole host of programs separate from those on its television networks, including series based on its Star Wars and Marvel properties, and the company certainly wants a return on the investment it’s made in such programming. Charter will have to make its case as football season gets underway, with a move that could deprive its subscribers of “Monday Night Football” in the coming weeks.
All media companies are trying to delve deeper into live broadcasting, working to deliver sports, news and scripted programs on services such as Paramount+, Hulu, Max, Tubi and more. However, they continued to rely on Charter Bros. fees to pay for programming. How to solve the current cable problem may be of interest to people outside of the Magic Kingdom. “If others follow, it increases the risk of future transportation disputes, blackouts, and lower affiliate growth,” Stephen Cahal, a media industry analyst at Wells Fargo, said in a research note Friday. He said the fight between Disney and Charter was “probably more stormy than a teapot”.
In a different era, distributors had exclusive access to large audiences and sporting events. And in 2023, they will enjoy it even less. That’s why Charter CEO Chris Winfrey has made new demands. As content companies move more shows to streaming video, cable has become less attractive to its subscribed consumers. So why keep paying more? “The notion that someone has said publicly, over and over again, that it’s going direct-to-consumer, and you’re signing up for this kind of long-term deal, is untenable,” Winfrey said during a conference call with investors on Friday. . He even threatened to move forward without Disney permanently if an agreement was not reached “quickly.”
Disney started talking about the day ESPN, its most coveted TV property, would make all of its programming available to streaming subscribers. But so did others. Warner Bros. plans. Discovery to begin showing Major League Baseball, NBA and NHL games that regularly air on TNT and TBS simultaneously on its Max streaming service, under the Bleacher Report brand. The same company also plans to air CNN shows like “Anderson Cooper 360,” “The Situation Room with Wolf Blitzer” and “The Lead with Jake Tapper” on Max at the same time as the shows on the cable news outlet.
Other dire scenarios are possible. Fox Corp. CEO Lachlan Murdoch told investors in several recent earnings calls that Fox is set to negotiate renewals for about a third of its carriage contracts over the next 12 months or so. Imagine if a charter company or one of its competitors had insisted that their customers not be forced to pay for Fox News, the linchpin of Fox’s finances. S&P Global Intelligence expects the network to generate more than $1.95 billion in affiliate fees in 2024. Paramount Global, meanwhile, is putting a lot of promotional power behind its Paramount+ streaming service, but many of its cable outlets have been left out. New content for several months. Comedy Central, for example, has stopped airing even repeats of its flagship show, “The Daily Show,” amid labor strikes in Hollywood, and is filling a large portion of its schedule with repeats of “The Office” and “Seinfeld.” MTV, once a network that was a youth culture icon, stocked its schedule over the next few days with repeats of “Ridiculousness” and “Catfish: The TV Show” as well as a movie marathon of “The Twilight Saga” movies.
Even Comcast, which was more familiar with charter’s predicament than most content companies because it also runs the nation’s largest cable company, got in on the act. It has begun making “Saturday Night Live” episodes simultaneously available on both NBC and Peacock when new episodes premiere. Peacock also offers a “bundle” of morning news programming across its lineup of NBC channels, allowing some subscribers to stream “Today”, “Morning Joe” and “Squawk Box” directly.
It’s no wonder, then, that according to Charter, nearly 25 million customers, or 25% of the multichannel video software distributor base, have canceled their subscriptions over the past five years. Most of the hot stuff is easily available via live streaming. Even if there is an exclusive window for cable, it’s not long enough to matter. Disney’s Hulu dropped episodes of a new series of “Justified” on Hulu within one day of its debut on FX. Fox News delivers new episodes of Fox Nation’s prime time lineup within hours of their live cable debut.
Charter isn’t the flashiest competitor in this segment. The company is headquartered in a new building near the train station in downtown Stamford, CT. But she emerged as a tough negotiator. In 2017, Charter moved Paramount’s former Viacom-owned cable networks to a higher level of service, limiting the number of customers who would pay for them, in part out of frustration with the networks’ performance. It also revealed plans to offer a range of networks without including sports, a move that would reduce costs for subscribers. Charter has teamed up with Comcast to launch Xumo, a service that will deliver cable networks and streaming applications via a single, smaller device, rather than a cable box.
Charter risks everything he can. Cahal, the analyst, says the company could see as many as 1.8 million subscribers exit if Disney fans leave to find its programming elsewhere. He estimates such a dynamic could affect $3.7 billion in revenue, or 7% of his total for 2024. The conflict with Disney could also affect future plans. Launching Xumo could be more difficult if Charter is at odds with many of the companies that run the broadcast centres.
However, Charter’s aggressive attitude towards the programmer may not be so surprising. Liberty Broadband, a company partly controlled by media tycoon John Malone, owns about a quarter of Charter’s shares. Malone earned a large portion of his wealth through the acquisition of stakes in major media companies such as Discovery and News Corp. and Time Warner when he ran TCI, then the largest cable distribution company in the country, in the 1980s and 1990s.
At the time, content companies were desperate for cable distribution to make their new networks work. Today, they need access to anything that cable ties can generate cash. Perhaps they will trade again with another Malone-controlled entity.