Disney and DirecTV work towards renewing deal before NFL season – One America News Network
August 30, 2024 – 3:06 AM PDT
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LOS ANGELES (Reuters) – Walt Disney (DIS.N) and satellite TV provider DirecTV are racing to renew their distribution agreement before the current pact expires on Sunday.
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If they fail to reach a deal, DirecTV’s more than 11 million subscribers could lose access to Disney channels, including ABC and ESPN, just days before the National Football League kicks off its season on Thursday, and midway through the U.S. Open tennis tournament.
DirecTV has said it wants to change its offerings to cater to consumer tastes in the streaming TV era. It is pressing Disney to allow it to sell smaller, lower-priced packages, including tiers without ESPN, for customers who do not watch sports.
“DirecTV believes that programmers need to collaborate with pay TV distributors to deliver entertainment options that align with consumer preference,” DirecTV Chief Content Officer Rob Thun wrote earlier this month, in an open letter to consumers.
Disney has proposed multiple scenarios, including one sports-centric offering that would combine ESPN and ABC, according to one person familiar with its negotiating posture.
“We’re working hard to get it done. We want to get it done. We want to deliver for sports fans,” ESPN Chairperson Jimmy Pitaro told Reuters.
“We do believe that we bring a lot of value. And hopefully DirecTV recognizes the value that we bring and we can continue to serve our fans through their platform,” Pitaro added.
Such disputes between programmers and distributors have been playing out for decades, though they have taken on a different tenor in the age of streaming.
The top pay TV providers have 67.7 million subscribers, down about 22 million subscribers from the second quarter of 2019, said Leichtman Research Group, as cable and satellite TV customers gravitate to online streaming services.
DirecTV accounted for about half the net losses, Leichtman reported.
The entertainment companies have tried to strike deals that keep the legacy cable-TV business generating profits as they build their streaming services.
For example, Disney agreed to allow Charter Communications (CHTR.O) to distribute the Disney+, Hulu and ESPN+ streaming services to its Spectrum TV subscribers, allowing the nation’s second-largest pay TV company to capitalize on the rise of streaming. In return, Charter agreed to pay higher rates to carry Disney’s TV channels.
“The new template that Disney and Charter agreed to has reshaped the tone of some of these negotiations going forward,” said MoffettNathanson media analyst Robert Fishman.
Live sports have remained a programming mainstay that kept subscribers paying their monthly TV bills. But sports are rapidly exiting the cable bundle, with YouTube (GOOGL.O) paying a reported $2 billion a year for rights to the NFL Sunday Ticket, and Amazon Prime Video (AMZN.O) this year offering $1.8 billion to stream NBA games, starting in 2025.
Three major programmers are planning to launch a new sports-streaming service that could further threaten the traditional pay TV business.
Disney, Fox and Warner Bros Discovery announced earlier this year they would combine their broad portfolio of professional and collegiate sports programming into a single app, now known as Venu Sports. Executives described the venture as a bid to capture younger viewers who do not subscribe to pay TV.
However, Pitaro acknowledged in a deposition that he informed Disney’s board of directors that the sports streaming service, code-named “Raptor,” would draw an estimated 67% of its subscribers from pay TV. Despite this cannibalization, Disney believes Venu will expand the number of people paying to watch sports, the person familiar Disney’s rationale said.
A dispute over rights given to Venu Sports provides the backdrop of Disney’s current negotiations with DirecTV.
Rival sports streaming service FuboTV sued, alleging anticompetitive behavior by the media companies that control 60% of the rights to broadcast live sports in the U.S.
At issue is a long-standing industry practice of “bundling,” in which programmers distribute several of their networks together, or not at all.
Fubo claimed it was thwarted in its efforts to provide a sports-centric service because it was forced to also carry non-sports networks that its customers rarely watch. Fubo sued when the media partners behind Venu granted the coming streaming service live sports rights they have yet to provide another distributor.
A federal district court judge ruled Fubo is likely to succeed in proving its antitrust claims at trial, and temporarily barred the launch of Venu.
The media companies, which had hoped to launch Venu in August, ahead of the start of the NFL season, appealed the ruling on Aug. 23. They are asking the U.S. Court of Appeals to expedite the process, saying the media companies have invested about $74 million in a start-up business that has been blocked from coming to market.
Reporting by Dawn Chmielewski in Los Angeles and Lisa Richwine in Bristol, Connecticut; Editing by Richard Chang
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