- Charter Communications has 14.7m cable subscribers
- ESPN could launch full DTC version as early as 2025
Nearly 15 million homes in the US no longer have access to ESPN following a dispute between the sports network’s parent company Disney and cable firm Charter Communications.
The two parties had been negotiating a new carriage deal before discussions broke down late last week.
This resulted in ESPN, along with ABC and Disney’s other pay-TV channels, pulled from Charter’s platform, which serves 14.7 million customers in 41 states and in some of the country’s biggest cities – including Dallas, New York, and Los Angeles.
Charter chief executive Chris Winfrey told investors that the company had acquiesced to Disney’s request for higher carriage fees, meaning the company would receive more revenue for each cable subscriber.
However, Winfrey said Disney would not countenance a deal in which Charter customers would receive access to the ad-supported versions of Disney’s streaming services – including ESPN+ – at no extra cost.
In a statement, Disney said its channels accounted for more than half of the most-viewed broadcasts in Charter homes in the past year and that 71 per cent of subscribers tuned into its services in a given month.
‘Although Charter claims that they value their customers, they declined Disney’s offer to extend negotiations which would have kept Disney-owned networks up for consumers in the middle of perennial programming events like the US Open and college football’, said the media giant.
‘Even though Charter also claims to value Disney’s direct-to-consumer (DTC) services, the cable company is demanding these different services for free – as they have stated publicly – which does not make economic sense. Moreover, it does not make sense for consumers who desire the flexibility to have our streaming platforms as standalone services.
‘Disney deeply values its relationship with its viewers and is hopeful Charter is ready to have more conversations that will restore access to its content to Spectrum customers as quickly as possible.’
Carriage fees are a lucrative business for ESPN and the principal reason why it has not gone all-in on DTC already. Indeed, some might argue that the linear version of ESPN is the only thing holding the cable bundle together.
Blackouts and disputes over fees are not uncommon in the US, but this wider context helps explain why this standoff is more significant than others. Disney clearly believes its channels are too important for Charter to hold out for too long, yet 14.7 million homes is a large proportion of the 72.5 million homes that ESPN is available in. That’s a lot of subscription fees.
However, Charter also senses a potential existential threat to its business, calling the current pay-TV model “broken”. With ESPN preparing to launch a full DTC version as early as 2025, there is every chance that many of its subscribers could cut the cord now that top sporting events like college football and the National Basketball Association (NBA) are no longer exclusive to cable.
A prolonged battle will suit neither side but Charter believes that since its fees will help drive ESPN revenue before it makes the shift to streaming it should have some protection against the threat of churn. Given Disney is waiting for a tipping point before taking that leap of faith, and therefore dictating the timeline to its pay-TV partners, Charter feels the media giant cannot have its cake and eat it too.
ESPN’s migration to DTC is one of the most significant developments the sports industry must contend with in the next few years. This dispute shows why it will also be one of the most complex.