February 12, 2025
Explainer behind the Disney-charter controversy over the future of TV

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by Don Chmielewski and Lisa Richwine

(Reuters) – Charter Communications, one of the largest cable companies in the United States, is locked in a battle with Walt Disney in a distribution dispute that could shape the future of television in the streaming era.

ESPN, ABC and other Disney channels disappeared from Charter’s Spectrum cable service on Thursday, denying its nearly 15 million video subscribers access to the US Open tennis tournament, college football and other programming.

While such “carriage disputes” are common in the media world, TV channels go dark as cable companies negotiate with media companies how to price their channels and how to package the channels, This fight is different.

Why are both the companies fighting?

Media executives are trying to create profitable streaming services, while cable providers argue they are subsidizing a business that is hurting their own.

Charter pays Disney more than $2.2 billion annually for the rights to distribute ABC, ESPN, FX and other channels to subscribers, which includes major markets such as New York and Los Angeles.

Companies like Charter say rising distribution fees are forcing cable companies to raise prices, driving away consumers. According to a Charter presentation, this “vicious video cycle” has caused the industry to lose 25 million subscribers over the past five years.

The company wants a hybrid model that will slow the decline of its traditional business while giving customers access to new streaming services.

Charter Chairman and CEO Christopher Winfrey indicated that the company was willing to move away from the traditional cable television business if Charter did not find acceptable terms.

“We are on the edge of a cliff,” Winfrey told a news conference on Friday. “We’re either moving forward with a new collaborative video model, or we’re moving on.”

What does Charter want?

The country’s second-largest cable operator said viewership for Disney’s sports, entertainment and children’s programming has declined as the media conglomerate invests in its Disney+ streaming service.

Charter said it agreed to pay a higher fee to air Disney’s channels, but in return demanded more flexibility in how it bundled programming for customers, including excluding sports channels from more packages. Storage option is also included. Charter intends to make Disney’s ad-supported streaming services available to its broadband customers at no extra charge.

What does Disney want?

Disney is trying to manage dwindling cable subscribers while building streaming offerings. The company relies on fee companies such as Charter to partially cover rising programming costs, including the rights to broadcast sports such as the NFL and NBA. It wants to keep as many cable subscribers as possible while it prepares to offer ESPN directly to consumers on an app. Disney has objected to Charter’s demand that it provide Disney+ for free.

Why is ESPN important?

Analysts at SVB Moffetnathansson said Disney’s public statements about turning the sports network into a streaming service unnerved distributors. According to SVB Moffetnathanson, Charter sought assurances from Disney that any future ESPN direct-to-consumer service would be offered at no additional cost to its existing customers, which Disney refused.

Charter also wants to provide a way for customers to opt out of the sports package, said Lightshed analyst Rich Greenfield. Under its previous Disney agreement, Charter included ESPN as part of the video packages taken by 80% of its customers, he wrote. Charter is attempting to reduce those so-called “entry” requirements.

What does this mean for consumers?

Streaming services have given consumers alternatives to cable packages. Disney is urging Spectrum customers to sign up for a live TV package from its streaming service Hulu that includes ESPN and dozens of other channels, similar to other streamers.

For Spectrum customers who don’t want to switch, Disney-owned channels will remain dark until the two sides reach an agreement. If the dispute extends to next week, those viewers will not have access to the US Open final or the NFL’s Monday Night Football season opener.

(Reporting by Dawn Chmielewski and Lisa Richwine in Los Angeles; Editing by Josie Cao)

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