In an ongoing contract dispute that has left millions of viewers in the lurch, Disney (DIS) and Charter (CHTR) remain at odds, with no immediate resolution in sight. The conflict escalated last week when Disney made the bold move to remove its owned and operated channels, including sports juggernaut ESPN and the beloved ABC network, from Charter Spectrum cable systems.
As the blackout persisted, Disney encouraged Spectrum subscribers to explore alternative viewing options, notably Hulu + Live TV, to ensure they don’t miss out on their favorite programming. The disruption left sports enthusiasts unable to catch the US Open and numerous high-profile college football games, as ESPN and its affiliate channels remained inaccessible. Furthermore, this disruption extended to other Disney Entertainment channels such as the Disney Channel, Freeform, National Geographic, and even local news stations affiliated with the ABC network.
Despite the tumultuous situation with Charter, Disney attempted to placate frustrated viewers through a blog post on Tuesday, stating, “Despite the ongoing dispute, consumers have many other choices—such as Hulu + Live TV—that allow them to enjoy the great programming for which Disney Entertainment is known.” The company expressed its commitment to its viewers and expressed optimism about reaching a resolution with Charter in the shortest possible time.
The core of this contractual standoff centers around whether Disney should offer Charter subscribers complimentary access to its ad-supported streaming services as part of Charter’s cable package. Charter has also accused Disney of demanding higher rates and imposing rigid conditions on consumers.
Charter made its stance clear, asserting that Disney “wants to require customers to pay twice to get content apps with the linear video they have already paid for.” They underlined that this dispute is not a typical carriage dispute, emphasizing its significance not only for Charter but also for programmers and the broader video ecosystem.
Disney Entertainment, in a robust response, contended that Charter declined to engage in a new agreement that reflects market-based terms. They countered Charter’s claims, stating, “Contrary to their claims, we have offered Charter the most favorable terms on rates, distribution, packaging, advertising, and more.”
This dispute takes place against the backdrop of a shifting television landscape, where traditional linear television viewership is dwindling as more viewers turn to streaming services. Recent data from Nielsen revealed that linear TV viewership fell below 50% in July for the first time, underscoring the changing dynamics of the industry.
Industry analysts have chimed in, highlighting the potential consequences of a protracted disagreement between Charter and Disney. Bank of America analyst Jessica Reif-Ehrlich cautioned, “If this posture were to be extrapolated across all other major video distributors, we believe it would have a devastating impact on the profits and losses of the entire traditional media & entertainment group.”
She added, “The result would lead to a significant decline in highly profitable linear subscribers that would be only partially recouped by likely fewer and less profitable direct-to-consumer subs.” This, she argued, could amplify long-term concerns for media companies with substantial debt loads, including Paramount Global (PARA), Warner Bros. Discovery (WBD), and Fox (FOX).
Wells Fargo analyst Steve Cahall emphasized that Charter’s dispute with Disney represents “a line in the sand intended to change the norms of network distribution.” The stakes are high for both parties, with Cahall estimating that Charter could lose approximately 1.8 million subscribers in the event of a permanent blackout of Disney’s channels. This could translate to a staggering hit of around $3.7 billion in Charter’s annualized revenue, constituting roughly 7% of the consensus full-year 2024 revenue.
Cahall did mention that costs might be mitigated by decreasing programming expenses, highlighting, “[We] actually see this as a far bigger deal for media than Charter. We estimate just 5% of CHTR’s EBITDA is video, while plenty of media/broadcast stocks get nearly 100% of EBITDA from linear networks/stations.”
As Disney and Charter remain entrenched in this high-stakes dispute, millions of viewers anxiously await a resolution that will restore access to their beloved channels and programming.
Source: Yahoo Finance
