A contract dispute between Disney (DIS) and DirecTV remains unresolved after the media giant pulled its own channels, including ESPN and ABC, from DirecTV last week.
In addition to college football, the media blackout has already affected the start of the NFL season, including the first game of Monday Night Football.
In addition to ESPN, affected Disney entertainment channels include Disney Channel, Freeform, National Geographic and will host the first presidential debate between Donald Trump and Kamala Harris on Tuesday night. It will include local news stations from the planned ABC network.
What is the crux of the problem? DirecTV isn’t going to distribute (and pay for) all of these channels. The company wants “leaner” bundles, and the media company itself is experimenting as terrestrial TV viewership plummets as more subscribers cut the cord and opt for streaming services. It’s starting.
“Everyone loses,” Needham analyst Laura Martin told Yahoo Finance’s Morning Brief on Tuesday. “Content and distribution are complementary networks. They both win and lose together. But as Disney continues to raise prices, this is inevitable.”
“DirecTV wants to pay less because of negative profit margins in its cable business. So these types of disputes will become more and more common.”
The dispute is similar to last year’s media blackout between Disney and broadband provider Charter Communications (CHTR). CHTR fought to incorporate more Disney streaming options into its bundled services.
The two sides ultimately agreed that Charter would offer some Disney streaming services (Disney+, ESPN+, an ad-supported version of ESPN’s yet-to-be-launched direct-to-consumer service) as part of some cable packages. reached. There is no additional cost to the consumer.
However, this time the negotiation tips are different.
“What’s different is that DirecTV doesn’t have a broadband distribution business that they can partner with in any way,” Macquarie analyst Tim Nolen said in an interview with Yahoo Finance on Monday. “They’re completely dependent on the pay-TV ecosystem, and Disney is fighting them hard because they can do that.”
In other words, DirecTV, which boasts more than 11 million subscribers, cannot offer streaming packages as part of a bundle. That leaves satellite cable providers with less leverage in negotiations with Disney.
“Charter could come up with cross-selling options across broadband packages,” Nolen explained. “They can offer a combination of linear channels and streaming for pay TV subscribers, whereas DirecTV is a satellite provider.”
“They don’t have the same flexibility in how they deliver content to consumers over a broadband connection. Without that, I think DirecTV is even more limited in what it can offer.”
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