Christopher Winfrey, the CEO of Charter Communications, is contemplating a departure from the traditional cable TV model in response to the rise of streaming services. Despite having an extensive career in cable, Winfrey stated that if it benefits Charter shareholders and consumers, this shift is the direction they will pursue. The catalyst for this consideration is a highly publicized dispute with Walt Disney. As the two entities failed to reach an agreement on a new contract, Disney channels were removed from Charter’s cable services at the end of August, leaving approximately 15 million US households without access to popular channels like ESPN.
This disagreement, although not uncommon in the industry, carries unique characteristics that have caught the attention of analysts. MoffettNathanson, a research group, describes the situation as “not a typical blackout.” Charter appears genuinely willing to sever ties with Disney and possibly even abandon the entire traditional TV model. Charter, like many other cable companies in the US, has been losing TV subscribers to streaming services. Consequently, this trend has fueled their current standoff with Disney.
Winfrey accuses Disney of using the transmission fees paid by cable companies such as Charter to finance their streaming services, which ultimately pose a threat to the cable business model. He questions the fairness and sustainability of this approach. Disney’s CEO, Bob Iger, confirmed earlier this year that ESPN, a long-standing profit generator for the company, will eventually become a standalone streaming service. However, it won’t happen overnight, emphasizing that it’s a long-term plan.
In an effort to alleviate the financial strain caused by the escalating cost of broadcasting live sports, Disney has been exploring potential partnerships with companies like Amazon and Verizon for a revamped ESPN. This shift towards streaming platforms creates further challenges for cable companies such as Charter, as sports and news have traditionally been key components of their TV packages. Winfrey argues that this strategy is detrimental not only to the cable companies but also to entities like Disney, which continue to derive income from cable while many streaming services remain unprofitable.
Charter seeks to negotiate a deal where any future ESPN streaming service is offered at no cost to its cable subscribers, a proposal that Disney has rejected, according to analysts. Charter has made a similar request for other Disney streaming services, including Disney+. Disney does not anticipate its streaming business becoming profitable until 2024. Complementing this, other streaming services like Paramount Plus and NBCUniversal’s Peacock are currently operating at a loss. Furthermore, even when these platforms do turn a profit, analysts doubt they will match the financial success seen during the peak of the cable era.
The duration of the Disney-Charter dispute remains uncertain. Winfrey expressed a sense of urgency to resolve the situation but acknowledges the inability to predict its ultimate resolution. Disney has declared its readiness to reach an agreement that serves the best interest of Charter’s customers. The mounting pressure for a resolution is evident through a scathing letter from North Carolina Governor Roy Cooper to the heads of both companies. Cooper highlights the frustration and anger felt by constituents whose football viewing during the holiday weekend was disrupted due to the blackout. Notably, two prominent universities in the state, the University of North Carolina and North Carolina State, belong to a regional league whose games are now inaccessible to Charter subscribers.
The blackout has also reverberated to the US Open in New York, where players were unable to watch matches on television during the tournament’s second week. ESPN executives had to provide private logins for a Walt Disney app to selected players and journalists to allow them to view the games. For Coco Gauff, the US teenager who progressed to the women’s finals, the blackout meant missing one of the tournament’s defining upsets; Jelena Ostapenko’s defeat of the number-one ranked Iga Świątek on Sunday. Gauff expressed her shock at the situation, as ESPN was not available in her hotel.
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