https://www.msn.com/en-us/money/oth...y-networks-including-espn-and-abc/ar-AA1pOGcg
DirecTV Users Lose Access to Disney Networks Including ESPN and ABC
Two sides unable to agree on the fees and terms to distribute the Disney-owned networks
By
Joe Flint
Sept. 1, 2024 - 7:42 pm EDT
More than 11 million DirecTV subscribers lost access Sunday afternoon to channels owned by Disney, including ESPN and ABC, as the satellite broadcaster and entertainment giant were unable to come to terms on a new distribution deal.
The two companies are divided over an increase in fees Disney is seeking to carry some of its more popular channels as well as DirecTV’s desire to have more flexibility in how it sells those channels to its customers, people involved in the negotiations said.
“Disney is seeking too much money for what they are granting us,” said DirecTV Chief Content Officer Rob Thun in an interview.
Disney said DirecTV is seeking rates that aren’t in line with what other major distributors pay to carry its networks, according to Justin Connolly, president of Disney platform distribution.
For DirecTV subscribers, the blackout comes as the college football season has started and days before the NFL season kicks off. The Disney networks went dark Sunday just before the start of the USC-LSU football game on ABC and during coverage of the U.S. Open tennis tournament on ESPN2.
On Monday there is a Boston College-Florida State football game on ESPN.
The stalemate comes at a critical time for both distributors such as DirecTV and programmers like Disney. The growth of streaming has led millions of pay-TV customers to cut the cord to their service in favor of streaming services such as Netflix. That shift has meant significant losses in revenue to both DirecTV and Disney over the past several years.
While both companies have tried to keep up with viewing trends—DirecTV launched a streaming version of its distribution service and Disney has streaming platforms such as
Disney+, ESPN+ and Hulu—it is the traditional business model that still generates the bulk of revenue and profits.
Thun also said Disney wanted DirecTV to waive any legal claims that Disney’s behavior is anticompetitive. Disney declined to comment.
The fight with DirecTV marks the second time in roughly a year that Disney’s channels have gone dark on a major distributor. Last year, a contract squabble with Charter Communications led to a blackout that lasted more than a week, getting resolved shortly before ESPN’s first “Monday Night Football” telecast.
In addition to the fees Disney charges to carry its networks, another sticking point is how Disney’s various networks are sold by DirecTV to customers. Besides the ESPN networks and ABC, other networks affected by the impasse include FX, Disney Channel Freeform and
National Geographic.
DirecTV, which is the third-largest video provider in the country behind Charter and Comcast, has been vocal about its desire to offer networks in smaller bundles to customers based on genres of programming instead of the large bundle of networks that has been the backbone of pay-TV packages for decades.
In a company blog post last month, Thun chided programmers for “eroding the price-value proposition for pay TV customers by shifting the best programming to direct to consumer services while raising programming fees on pay TV.”
Disney countered that it is willing to negotiate specialty packages of channels and presented DirecTV with a sports-centric package it could offer subscribers.
“We’ve said we’re not allergic to that,” said Disney’s Connolly in an interview. He added that DirecTV hasn’t offered any “meaningful or concrete plan around that vision they laid out two weeks ago.”
One of the challenges to creating such packages is coming to terms on what is known as “minimum penetration levels,” meaning the number of homes a programmer would want a distributor to guarantee would receive its channels. DirecTV feels Disney is too aggressive in its minimum penetration level demands, a person familiar with the satellite broadcaster’s thinking said.
“They are looking for a discount,” Connolly said, adding that the cost of content for Disney keeps going up, particularly for sports rights and big entertainment events such as FX’s “Shogun” series.
Write to Joe Flint at
Joe.Flint@wsj.com
