Charter Disney Settlement: Are Content Disputes Tipping in Favor of Pay-TV Providers?

The settlement of contentious content negotiations between Charter and Disney late yesterday could be a watershed moment.

Over the years, Telecompetitor readers have become accustomed to blackouts of certain pay-TV channels as content and service providers undergo difficult negotiations, with content providers having the upper hand. But while negotiations are no less difficult than in the past, there seems to be a growing sentiment that the scales are tipping more in favor of the providers, or to at least be more in balance.

“Video is not an asset; it’s a liability,” said Charter CEO Chris Winfrey at an investor conference last week against a backdrop that caused Charter customers to temporarily lose Disney programming as the old contract expired and the new one had not yet been reached.

In a research note issued early yesterday, analysts at Moffett Nathanson noted that Charter had almost nothing to lose in the negotiations. Video had become, essentially, a break-even offering.

And as some industry observers have noted, it wouldn’t hurt Charter much to forego linear video from Disney and refer customers instead to streaming offerings that could provide essentially the same content.

According to MoffettNathanson, Disney had more to lose in the negotiations, so perhaps it’s not surprising that Disney gave Charter several unprecedented things involving Disney direct-to-consumer offerings that should benefit the cable company.

• The Disney+ basic ad-supported offering will be included in Spectrum TV Select video packages as part of the wholesale agreement between the two companies.
• The ESPN+ direct-to-consumer service will be provided to Spectrum TV Select Plus subscribers.
• The ESPN flagship direct-to-consumer service will be available to Spectrum TV Select subscribers when it launches.

As the analysts see it, the plan for the Disney+ offering is a win-win because Disney gets broader distribution of the offering. Another key benefit for Disney is that the company will get “very strong” rate increases for ESPN programming—although Charter has flexibility regarding programming packages, including determining which packages will include the sports offering.

Overall, MoffettNathanson called the agreement “transformative,” as some of same provisions could find their way into contracts with other video providers as well.

The upshot, the researchers said, is that “While perhaps not the end of the Pay TV world as we know it, we very much can look back at this Disney/Charter deal as an opening salvo of a broader re-bundling and a step in giving customers smaller linear bundles with increased SVOD functionality.”