DirecTV and Disney are set to negotiate the renewal of their distribution agreement, which expires Sunday.
As both sides are actively negotiating, it is not surprising that they cannot reach an agreement. The friction is starting to show itself in the open, even though so far there are no social media alerts or notifications on social media to warn customers of a possible power outage.
“They haven’t really considered the proposals that we’ve made to them” for customized channel packages, Justin Connolly, president of Disney Platform Distribution, said in an interview with Deadline. “They’re trying to blame the lack of investment in their platform on the programmers.” DirectTV CEO Rob Thun said the discussions were inevitably colored by the recent federal court ruling barring Disney, Fox and Warner Bros. Discovery from launching their proposed Venu Sports streaming bundle on antitrust grounds. “It leaves a really bad taste in my mouth,” he said, calling the media companies’ behavior “a dirty cop.”
Although loaded rhetoric is nothing new in transportation litigation, many has Things have changed in the pay-TV industry recently since Disney’s last major renewal, a high-profile dispute a year ago with Charter Communications. That dispute, which played out during the U.S. Open tennis tournament and the start of the college football season, led to a 10-day blackout of Disney networks. The end result was a landmark deal that left some established networks like Freeform without linear carriage in exchange for broader integration of streaming flagship Disney+ as well as Hulu and ESPN+.
DirecTV, now a private company owned by AT&T and private equity firm TPG, sees Disney’s renewal period as an opportunity to rewrite the traditional rules of the game. DirecTV, which has about 8 million satellite subscribers and about another million to its DirecTV Stream channel delivered over the Internet. Emboldened by the Charter outcome and the Venu decision, which came in a lawsuit brought by pay-TV operator Fubo, DirecTV sees a chance to keep costs down instead of continuing to pay for the same networks. That push has become more existential as programming has shifted away from linear and toward streaming. Millions of people, meanwhile, continue to cut the cord each year, while the value of cable networks continues to decline. Earlier this month, WBD and Paramount Global took a combined $15 billion in writedowns on the value of their cable assets.
“I think they thought they were just going to ignore the lawsuit and go on their merry way,” Thun said of the media companies behind Venu. “They planned to shut everybody out” and continue to force Fubo and other distributors to pay for less-interesting programming in exchange for access to popular channels like ESPN. Thun said the decision by some carriers to pull out or completely de-emphasize video (as Charter openly flirted with doing a year ago) “should serve as a warning to Disney.”
Connolly disputes the suggestion by Thun and others at DirecTV that Disney has taken a rigid approach or tried to impose unreasonable rate increases. “We’ve offered a number of options as far as flexibility in packages … and options like a selection of our linear channels bundled with our digital services, similar to the deal we did with Charter,” the executive says. “We’ve even offered ideas for sports-focused packages that would include ABC and ESPN.” While Thun has publicly urged Disney to offer such options, Connolly says, at the negotiating table, the operator has been less supportive of the concept.
“DirecTV is a private equity firm looking to generate revenue from subscribers” without creating innovative offerings. Claims that it wants to offer a new range of offerings to customers are “propaganda,” Connolly added.
Connolly said Disney networks were watched by 90% of DirecTV subscribers each month over the past year, according to internal data.
In terms of programming that could soon be in jeopardy on DirecTV, this is something of a repeat of last year’s charter standoff. The U.S. Open began Monday and runs through Sept. 8 on ESPN and its suite of platforms. The following day, Sept. 9, is Monday Night Football, with the New York Jets taking on the San Francisco 49ers.
According to Thun, the pay-TV ecosystem has reached its limits. The current business model of distributors and programmers, which is to pass on price increases to customers, is no longer sustainable. “We’ve reached the point where people are willing to pay,” he said.
