Yahoo Finance Disney and Charter Reach Agreement to End ESPN, ABC Blackout
(Bloomberg) -- Charter Communications Inc. will offer Walt Disney Co.’s flagship streaming service at no additional cost to cable-TV subscribers as part of a landmark deal the two companies announced Monday.
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The nation’s second-largest cable provider will include Disney+ in its $60-a-month Spectrum TV Select offering, the companies said. Charter will pay Disney a wholesale price for the service, according to people with knowledge of the matter.
Customers who pay for Charter’s more expensive Spectrum TV Plus, which includes regional sports networks, will get the ESPN+ streaming service at no added cost. Disney won’t receive a fee for those additional streaming subscribers, said the people, who asked not to be identified discussing details that haven’t been released.
With the agreement the companies are attempting to blend the worlds of traditional TV and online viewing in a mutually beneficial way. The deal between the two media giants ends a blackout for millions of pay-TV customers and came hours before ESPN’s first broadcast of the new NFL season’s Monday Night Football.
“This is the first big step toward changing the model,” Rich DiGeronimo, Charter’s president of product and technology, said in an interview. “It puts us on a glide path to provide the best of TV with the most popular streaming apps, which gives customers significantly more value than they have today.”
Charter’s 14.7 million customers will once again be able to watch popular Disney channels including ABC and FX after more than a week without service. Charter provides cable TV service under the Spectrum brand in a number of cities including New York and Los Angeles and is a major provider of the broadband services consumers use to stream movies and TV shows.
Disney won an increase in the fees it collects for its channels. The company also maintained contract terms that require 85% of Charter’s subscribers to get ESPN, according to the people. That minimum will drop to 80% when Disney offers the ESPN channel directly to consumers, something it plans to do in the future. Charter subscribers will receive the ESPN online offering at no additional charge when they do.
But Spectrum TV gets to provide its customers a narrower lineup of 19 networks from Disney under the agreement. The service will continue to carry ABC, the Disney Channel, FX and the Nat Geo Channel, in addition to the full suite of ESPN networks.
It will no longer offer Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild and Nat Geo Mundo, the companies said. Those channels cost cable providers about $2.13 a month, according to data from S&P Global Market Intelligence.
As part of the agreement, Charter will also market Disney streaming services, such as Disney+ and Hulu, to its broadband only customers.
The narrowing of Disney’s lineup on Charter cable systems creates an uncertain future for a number of channels that had cost the entertainment giant dearly over the years.
FXM, FXX, Nat Geo Wild and Nat Geo Mundo were part of Disney’s $71 billion takeover of Fox Corp. entertainment assets in 2019. The company acquired Freeform, previously known as ABC Family, for $5.3 billion from Fox’s predecessor company in 2001.
Shares of Disney rose as much as 2.8% to $83.85 in trading in New York. Charter added as much as 4.1% to $439.54.
Disney pulled its channels, including ABC and Nat Geo, off the Charter systems late last month after the two sides failed to reach a new distribution agreement.
The dispute meant many Charter customers couldn’t watch the US Open tennis tournament or college football as the new season began. Channels went dark in the middle of a US Open match between Lloyd Harris and Carlos Alcaraz, the Spanish tennis star who went on to reach the semifinals. The finals weren’t available to Charter customers.
The fight amounted to a showdown over the future of pay-TV between the world’s largest entertainment company and the largest US cable TV provider behind Comcast Corp. Pay-TV distributors have been losing subscribers to a new generation of streaming services, many of them operated by the same companies that operate cable channels.
Charter Chief Executive Officer Chris Winfrey argued that the media companies have been encouraging customers to switch by putting some of their best programming on their streaming services and the industry should instead work together to offer a combined cable-streaming offering.
(Updates with contract terms beginning in the second paragraph.)
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