What Disney’s Charter blackout means for advertising and the future of cable TV

Disney has issued a new statement on its continued dispute with Charter, putting renewed pressure on the cable company as subscribers lose access to major sporting events. The companies, which have been unable to settle terms for carriage on Charter’s cable service Spectrum, has led to a week-long blackout of Disney-owned channels including Disney Channel, ESPN, Freeform, FX and National Geographic, as well as local ABC stations in cities including New York, Los Angeles and Durham-Raleigh, North Carolina. “As the US Open reaches the men’s and women’s finals, and fans gear up for a weekend of college football and the opening of the NFL season, it’s unfortunate that Charter decided to abandon their consumers by denying them access to our great programming,” The Walt Disney Company said in a statement Thursday. “While they have stated their ‘indifference’ to the needs of millions of paying customers, we will not lose sight of what is most important—investing in the highest-quality stories, news and sports for our audience. The question for Charter is clear: Do you care about your subscribers and what they’re telling you they want—or not? Disney stands ready to resolve this dispute and do what’s in the best interest of Charter’s customers.” Meanwhile, Chris Winfrey, Charter's president and CEO, addressed the issue during a Goldman Sachs conference on Thursday. “I apologize that our consumers have been put in the middle here, but we felt it was worth it,” Winfrey said. “[The] very rich linear fees that our customers are paying to the programmers are then being funneled into direct-to-consumer products not available to them unless they pay twice … We’ve always thought about the video business as being an asset to our broadband connectivity business and I think it’s on the verge of flipping to where it’s becoming a liability.” Ad Age A-List & Creativity Awards Final deadline approaching for annual program Enter here The core of the dispute lies in the future of cable TV, and Charter’s desire to incorporate Disney’s streaming assets—Hulu, Disney+ and ESPN+—without paying Disney additional fees. In its investor call last week, Charter claimed it pays Disney $2.2 billion annually to air its channels. During a conference call with investors on Friday, Charter’s Winfrey said he was “disappointed that Disney so far has insisted on higher prices, forcing customers to take on their products when they don't want them or can't afford them and asking to require customers to pay for direct-to-consumer apps that their linear fees already pay for.” ‘ESPN was always the must-have’ While Spectrum subscribers stand to lose out on key programming, advertisers appear to be far less impacted. Multiple media buyers have told Ad Age that they don’t anticipate any impact on clients from the service blackouts, particularly because advertisers are protected by agreed-upon audience guarantees that Disney is obligated to make good on. One buyer said, “We have yet to see any impressions drop for any of our clients’ campaigns,” although the buyer noted information is still emerging. While Charter claims just a quarter of its subscribers view Disney’s networks and owned channels, Disney responded that 71% of Charter subscribers have tuned into its content, citing Nielsen. According to Insider Intelligence, Charter is the second-largest cable provider, with a subscriber base of 14.7 million. More: Why advertisers aren’t racing over to streaming At the heart of the carriage negotiation is sports. In addition to college football and the US Open, the NFL’s regular season kicks off today, Sept. 7, with ESPN’s first matchup set for Monday, Sept. 11. “ESPN was always the must-have,” a second media buyer said, and has been able to secure lucrative terms because of sports’ dominance in the linear TV ecosystem. “Charter is clearly drawing a line in the sand and saying ESPN doesn’t command that same value,” the second buyer said. “If this continues, it could accelerate cord-cutting and unbundling the [cable] bundle that everyone believes ESPN is holding together.” Watch: How ESPN is marketing college football this season Football marketing news Tracking Super Bowl, NFL and college brand moves Read more here The dispute points to the growing discord in the media industry as resources are pulled between disparate platforms, with consumers caught in the middle. A lawsuit was filed earlier this week by a Charter subscriber in Florida, claiming the company was not fulfilling its obligation to customers by not settling negotiations with Disney and continuing the coverage blackout. “Cable and satellite providers like Charter now make more money from their internet services than from pay TV, to the point that Charter is willing to walk away from the pay TV business altogether if its conflict with Disney isn't resolved,” said Paul Verna, principal analyst for Insider Intelligence, via email. “For [Disney’s] part, media companies are struggling to monetize their content in a world in which the pay TV base continues to dwindle, yet streaming services don't deliver the revenue margins networks enjoyed at the peak of the cable bundle era.”

What Disney’s Charter blackout means for advertising and the future of cable TV

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