A recent dispute between Disney and Charter Communications resulted in customers of the cable service Spectrum being cut off over the Labor Day holiday weekend. In response to this situation, Disney is hopeful that Charter will be open to further conversations that aim to restore access to its content for Spectrum customers.
To provide a temporary solution for affected users, the media and entertainment giant has offered Spectrum customers the option to sign up for Hulu+ Live TV. This streaming service includes popular channels such as EPSN, ABC, Disney+, and more. It is worth noting that Disney owns two-thirds of Hulu, making it a viable alternative for those affected.
Disney stated that Charter declined an offer to extend negotiations, which would have allowed customers continued access to ESPN, ABC, and other Disney-owned networks. Interestingly, Charter expressed a desire to offer its customers free access to Disney’s streaming services.
While Charter claims to value Disney’s direct-to-consumer services, the cable company is insisting on receiving these services for free, which Disney finds economically impractical. CEO Bob Iger has made it a priority to return Disney’s streaming business to profitability; therefore, giving it away for free is not a viable option. Conversely, Charter argues that Disney is demanding “unsustainable price hikes.”
The dispute itself is not typical, as it holds significance not only for Charter but also for programmers and the broader video ecosystem. Charter anticipates paying Disney over $2.2 billion in 2023, excluding the impact of advertising.
Overall, the disagreement between Disney and Charter Communications has temporarily disrupted Spectrum’s cable service. While Disney remains hopeful for open dialogue with Charter, affected users are being offered Hulu+ Live TV as an alternative solution. Both parties have expressed their differing perspectives on pricing and the value of content, contributing to a dispute with significant implications for the video industry.
The Changing Landscape of Legacy TV: A Defining Moment for Charter
Analysts from Oppenheimer have declared that a recent dispute has become a “tipping point” for legacy TV and a crucial moment for Charter’s business. With media providers shifting to over-the-top (OTT) TV, which refers to streaming content delivered over the internet, the expectation is that cable providers should still pay the same amount for legacy TV.
According to the analysts, the current linear TV business model is flawed and requires a combination and bundling with OTT services to salvage it in the long term. They believe that Disney will ultimately have to agree to Charter’s terms, or opt to transition to over-the-top immediately, thus dealing a blow to legacy TV. The impact of this dispute alone is estimated to cost Disney $4 billion in annual free cash flow, including advertising.
Lightshed Partners analysts further commented on Disney’s approach, stating that the company effectively wants to straddle both worlds as it moves into streaming. They acknowledge that it remains uncertain whether Charter is willing to permanently lose Disney networks, but historically, such battles typically end in some form of agreement.
However, if Charter insists on including streaming services at no additional cost as a “must-win” condition, reaching a deal anytime soon seems unlikely and the fallout could be permanent.
The pandemic years brought about a unique streaming experience for consumers, but it is unlikely to return. Netflix has introduced an ad-supported tier while discontinuing its basic plan, and they have also implemented measures to crack down on password sharing. Disney also recently announced price hikes.
The outcome of the Charter-Disney dispute holds considerable weight and has the potential to shape the future of the industry. As it currently stands, it appears that no party will emerge as a clear winner.
