Another Labor Day has come and gone, and once again so has the availability of the panoply of Disney-owned networks on a significant MVPD. Last year, Charter; this year, it’s DIRECTV. The leaves will soon turn, but the stomachs of many tech-simplistic fans of football, tennis and JEOPARDY! already have.
As USA TODAY’s Mike Snider wrote yesterday:
DirecTV and Disney have reached a stalemate. For viewers, that means ESPN, Disney Channel, FX and several other networks and channels went dark Sunday night.
The two companies have been negotiating a new contract to keep Disney’s content on DirecTV’s satellite and streaming services, including U-Verse TV, as a five-year contract ended Sept. 1.
Unable to reach a deal, Disney’s content went dark on DirecTV, leaving more than 11 million pay-TV subscribers unable to watch ESPN and ESPN2 just as the college and pro football seasons get underway. Other channels lost include ESPN Deportes, ESPNU, ESPN News, ACC Network, SEC Network, Disney Channel, Disney Junior, Disney XD, FX, FX Movie Channel, FXX, Freeform, and the National Geographic channels.
And just as consistent with the impending change of seasons is the escalation of rhetoric and lines being drawn in the sand by both sides of this dispute. The HOUSTON CHRONICLE’s Timothy Malcolm dutifully reported them:
“While we’re open to offering DirecTV flexibility and terms which we’ve extended to other distributors, we will not enter into an agreement that undervalues our portfolio of television channels and programs,” read a joint statement Sunday by Disney Entertainment co-Chairmen Alan Bergman and Dana Walden, and ESPN Chairman Jimmy Pitaro. “We invest significantly to deliver the No. 1 brands in entertainment, news and sports because that’s what our viewers expect and deserve. We urge DirecTV to do what’s in the best interest of their customers and finalize a deal that would immediately restore our programming.”
Well, like any good parent, you gotta put as much of a spin on your loved ones as possible, though I can’t picture Walden or Bergman spending any more appreciable time with the majority of that portfolio than moi. Which thanks the ubiquity of programmatic availability includes even the FX and ABC shows I do watch.
And this is exactly why DIRECTV is as determined to challenge the concept of “value” as they are. Virtually nothing that those channels offer can’t be seen somewhere else, specifically Hulu and Disney Plus. That was the gist of the deep dive I was tasked with last year when the seeds of this showdown were being sown by the gentleman who issued this very stern rebuttal to the chairpeople of Burbank:
In a statement issued to CNN, DirecTV Chief Content Officer Rob Thun said Disney is “refusing any accountability to customers” in not coming to an agreement affecting more than 11 million satellite subscribers.
“Disney is in the business of creating alternate realities, but this is the real world where we believe you earn your way and must answer for your own actions,” Thun’s statement read. “They want to continue to chase maximum profits and dominant control at the expense of consumers—making it harder for them to select the shows and sports they want at a reasonable price.”
The LOS ANGELES TIMES’ Meg James, as usual, provided additional context and background for Thun’s position:
The environment has changed dramatically since the last time the two companies hammered out an accord. That was in 2019 when DirecTV was wholly owned by AT&T. Since then, the phone giant has spun its television distribution group into a separate entity and taken on a private equity partner, TPG, to manage the business.
For the past year, DirecTV executives have been working on plans to increase its offerings to consumers.
DirecTV wants to offer genre-themed packages — think sports or general entertainment — to provide cheaper plans for customers who refuse to pay $100 or more each month for a traditional bundle with more than 100 television channels. Executives want to appeal to customers who have long pined for a way to sign up for only the channels they actually watch.
“People watch genres,” DirecTV Chief Content Officer Rob Thun said in a recent interview with The Times. “We think choice and control can be afforded to customers but that flexibility is not available to us today.”
Thun is a student of data, a fact I saw first-hand when he was part of arguably the most aggressive and successful negotiating team on any content side, a group of All-Stars that also included the current heads of Amazon MGM and the distribution divisions of Paramount Global and Nexstar, as well as one-time heads on the MVPD side of companies owned by T-Mobile and Time Warner. They’d bring me in to help them with the same kind of trench warfare tactics that Disney is employing right now–tie a contract renewal date to a particularly noisy time of year where tentpole events cluster, and pull the plug at a particularly sensitive moment. In this case, the plug was pulled minutes before a highly anticipated intersectional college football game between USC and LSU on ABC and during ESPN’s daylong coverage of the U.S. Open.
That data shows that his customers don’t relish paying three-digit monthly fees for a lot of stuff they otherwise ignore, now more than ever as the sustaining schedules for these channels–including even ABC affiliates and ESPN–are largely constituted of endless blocks of shared off-network series and movies and encores of newscasts from earlier in the day.
NBC SPORTS added further details on just how Thun and company are feeling:
As noted by sports business reporter Daniel Kaplan on X, a press release from DirecTV adds to the typical they’re being cheap and they’re being greedy contentions a reference to the recent litigation that upended (for now, and possibly for good) the sports mega-streamer proposed by Disney, Fox, and Warner Bros. Discovery.
“[J]ust hours before today’s expiration, Disney demanded that to reach any licensing agreement or to extend access to its programming, DIRECTV must agree to waive all claims that Disney’s behavior is anti-competitive,” DirecTV contends. “Moreover, any future lawsuits resulting from DIRECTV/Disney licensing agreements would be adjudicated in California — and not New York — because — as Disney counsel specifically stated — SDNY Judge Garnett ‘didn’t understand the issues’ when granting a preliminary injunction against Disney’s Venu Sports. Disney’s last-minute demands to foreclose upon any legal accountability for its growing pattern of anti-competitive actions should be troubling to all pro-consumer advocacy groups, regulators, and Department of Justice attorneys alike.
These are issues that really matter to a platform that is admittedly hemorrhaging subscribers–per James, it has lost nearly half of its footprint in the last decade. Certainly, the efforts of Disney in the streaming space have contributed to that, particularly since Hulu offers a Live Channels option that is a skinnier bundle than the ones DIRECTV is capable of offering. And as James further elaborated, Disney seems to have selective retention on those facts when they negotiate:
The satellite TV company said it has asked Disney to ease a key distribution requirement — minimum penetration rates. For example, Disney’s deals require that DirecTV and other distributors provide ESPN to a minimum of nearly 80% of its customer base. DirecTV maintains that such “antiquated” penetration rates “force pay TV customers to subscribe to many channels they may not watch,” and the contracts limit DirecTV’s ability to offer smaller and less-expensive packages.
Content providers claim that they need that threshold to offer a sufficient universe estimate to effectively sell time. But when streaming availability is factored in, coupled with the methodologies that Nielsen uses to calculate them, the net loss for individual networks is proportionately far lower than it is for a platform. And it doesn’t seem to have any effect on the ability to deliver audience for the kinds of tentpole events that spark these cause celebres. Indeed, Disney spin doctors put this one out just yesterday which ON3’s Grant Grubbs dutifully reported:
USC‘s exhilarating 27-20 win over LSU on Sunday averaged 9.2 million viewers on ABC and peaked at 11.1 million, per ESPN PR. Further, it was ABC’s second-most watched Week 1 on record, with 8 million viewers across its four games.
What is impacted is the ability for those much less significant sustaining schedules to be sold, and, even more importantly, Disney’s ability to take the fees for those 11 million subscribers to its challenged bottom line. A bottom line that has its woes due to missteps in streaming and softness in the historically robust theme park sector.
Respectfully, that’s not DIRECTV’s problem, or any other one of Disney’s clients. What is DIRECTV’s problem is that they don’t quite offer the same sort of strengths that Charter was able to bring to the table last year that got that whole megillah settled a few hours before Aaron Rodgers’ four-play season got under way on the MONDAY NIGHT FOOTBALL season opener. As James reminded:
Charter didn’t force the issue of penetration rates. Instead, Disney and Charter agreed to widen the reach of the Burbank company’s streaming services, including Disney+ into Spectrum homes…(and ultimately wind up with) an agreement that saw several smaller Disney channels, including Freeform and Disney Jr., dropped from Spectrum’s lineup.
As an IP, Charter/Spectrum is able to directly benefit from homes that want upgraded services to accommodate streaming platforms, a reason their executives cites as a driving force behind their seeming indifference to Disney’s portfolio. And while AT&T is still part of the overall DIRECTV picture, it is no longer as one-to-one as it once was.
So at least as of this writing, it’s contentious times. And knowing Thun as I do, let alone knowing what he’s being tasked with, he’s as likely to give up ground as his beloved Georgia Bulldogs were to Clemson this past Saturday–which just happened to be one the last games I saw on ESPN. For you non-sports fans, his top-ranked Dawgs destroyed the Tigers 34-3.
You might pick up that I have a rooting interest in this battle. I make no qualms to the contrary. But it’s not just because we have a past. He and his team have a future–or at least they hope they do. And so do his subscribers.
Disney? They’ll manage.
Until next time…