Disney and Charter Reach New Spectrum Retrans Deal

On the evening of August 31, every ABC Owned Stations property and each of The Walt Disney Co.‘s cable television channels were blocked, by law, to those who rely on Charter Communications’ Spectrum MVPD to receive the video offerings.

Charter used tough words, suggesting that it was prepared to walk away from Disney. This prompted speculative research reports detailing the fallout from such a move.

Now, with the debut of Monday Night Football and the Buffalo Bills taking on the New York Jets in Aaron Rodgers’ QB debut for the latter team just hours away from kickoff, Charter and Disney have agreed to end the impasse.

With an official announcement forthcoming, numerous media sources confirmed the news, which was announced on financial news channel CNBC by commentator David Faber in the 10am Eastern hour; independent confirmation of the news was not available until the following hour.

According to Faber, the new carriage and retransmission consent agreements include “a discounted wholesale price” for subscribers for Disney streaming services, along with a desired increase in subscriber fees paid to Disney.

A ‘Transformative’ agreement was announced by both Charter Communications and The Walt Disney Company following independent confirmation of the new agreement. Click on the home button or RBR+TVBR logo above to view our additional coverage from 12:30pm Eastern.

What perhaps makes the new agreement allowing Spectrum to resume bringing all Disney-owned stations to its customers is how quickly a resolution came to fruition. Given the statements made September 1 by Charter Communications executives, a protracted “blackout” was largely anticipated by market observers.

For viewers of 7 ABC Owned Stations that could not be viewed by Spectrum customers — WABC-TV in New York; KABC-TV in Los Angeles; WLS-TV in Chicago; KGO-TV in San Francisco; KTRK-TV in Houston; KFSN-TV in Fresno; and WTVD-11 in Raleigh-Durham — a return comes just in time for MNF in market No. 1.

But, it did not come in time for the conclusion of the 2023 U.S. Open, which had been directly impacted by the “blackout” as the facilities in Queens, N.Y., relied on Spectrum to feed all of the monitors across the tennis event. They went dark, just as they did for millions of subscribers across the U.S.

While the O&Os are heading back in their respective markets, all Spectrum subscribers are getting back their ESPN-branded channels plus SEC Network, ACC Network, and Longhorn Network; entertainment networks FX, National Geographic, and family-oriented cable TV offerings Disney Channel.

The networks that will no longer be included in Spectrum TV video packages, the companies confirmed, are Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo.

Some may view the new retransmission accord as a win for Disney.

“We’re committed to reaching a mutually agreed upon resolution with Charter and we urge them to work with us to minimize the disruption to their customers,” The Walt Disney Co. said in a statement on September 1.

At that time, the tone from Charter was ominous. In an investor webcast to discuss the status of its distribution agreement with The Walt Disney Company, Charter President/CEO Christopher Winfrey, Chief Financial Officer Jessica Fischer, and President of Product and Technology Rich DiGeronimo each participated in the event. They made it clear that while Spectrum owner Charter “respects the quality video products that The Walt Disney Company produces as well as the experience of its management team,” it argued that “the current video ecosystem is broken, and we know there is a better path that will deliver video products with the choice consumers want.”

Charter also expressed disappointment that Disney has “insisted on unsustainable price hikes and forcing customers to take their products, even when they don’t want or can’t afford them.” This is a reference to ESPN, which is a $10 cost to each Spectrum subscriber, even as the network’s reign has diminished significantly and has been tied to rumors of its sale by Disney.

Charter also assailed Disney for wanting to “require customers to pay twice to get content apps with the linear video they have already paid for.”

As such, Charter asserted that “this is not a typical carriage dispute. It is significant for Charter, and we think it is even more significant for programmers and the broader video ecosystem.”

Thus, Charter presented Disney with a solution by proposing a model to Disney it believes “creates better alignment for the industry and better products for customers,” Charter said. “It is a model that could both stabilize linear video and create a clear growth path for direct-to-consumer (DTC) video, with a more customer-friendly and financially attractive end-state for programmers.”

Few believed Spectrum would compromise with Disney, setting the stage for a difficult situation as the National Football League regular season approached.

“We believe that renewing a traditional distribution deal in line with The Walt Disney company’s current offer would ignore the realities of today’s video business and accelerate its decline,” Charter insisted. ” We do not take this decision lightly. For 2023, we had expected to pay The Walt Disney Company more than $2.2 billion for just the right to carry that content, not including the impact of advertising on either party. But we have reached a precipice and must chart a path to change.”

Will that path to change still be paved, only at a later date?

That’s possible. But, what was saved was what S&P Global Market Intelligence said last week are billions of dollars in annual revenue.

“While both companies are invested in making these relationships work, there are obvious pain points that might result in changes to the status quo,” the S&P arm that includes Kagan reasoned. “If Disney makes concessions on pricing, it has the potential for other programmers — such as Paramount Global and Warner Bros. Discovery Inc. — to lose negotiating leverage with operators moving forward and be forced to accept lower rates for the linear networks. On the flip side, if Charter agrees to Disney’s demands, smaller operators might be put in a position to abandon video altogether as the margins no longer make sense. While we do believe that a deal will eventually be reached and Disney’s channels will return to Charter’s lineups, the impact of the dispute has the potential to alter future carriage negotiations across the industry.”

Indeed, that’s what is now likely to come under the magnifying glass, now that a new agreement is being finalized.

‘A RETRANS SENSITIVITY ANALYSIS’

Kagan Senior Analyst Justin Nielson on Monday released fresh data illustrating how the dispute now ranks second in terms of multichannel provider subscriber loss of local TV channels — behind the retrans disconnect between Nexstar Media Group and DirecTV LLC that started July 2 and impacts approximately 50.5 million subs.

Other ongoing retrans disputes this year include Nexstar’s local marketing agreement partners Mission Broadcasting’s and White Knight’s TV station retrans dispute with DISH Network Corp., which has left those stations dark for an estimated 1.1 million subs since January.

Then, there’s the fresh dispute involving Hearst Television, which Nielson did not mention in his commentary.

But, Nielson did review the 11-day impasse between Charter and Disney, and he said the dispute represented 23% of the combined total multichannel video sub overlap in New York; Los Angeles; Chicago; San Francisco; Houston; Fresno; and Raleigh-Durham.

Based on Kagan 2023 estimates, Disney’s ABC O&O TV stations in overlapping Charter/Spectrum video subscriber markets average $2.30 and $2.74 in retrans fees per sub per month, respectively. “Disney’s ABC O&O TV stations have typically trailed their peers in terms of retrans per sub rates with a smaller video footprint and greater focus on growing their cable network affiliate fee base in each renewal period,” Nielson said.