Disney and DirecTV aim to renew deal ahead of NFL season

FuboTV

30/08/2024 11:00

By Dawn Chmielewski and Lisa Richwine
       LOS ANGELES, Aug 29 (Reuters) - Walt Disney  DIS.N  and
satellite TV provider DirecTV are racing to renew their
distribution agreement before the current pact expires on
Sunday.
    If they fail to reach a deal, DirecTV's more than 11 million
subscribers could lose access to Disney channels, including ABC
and ESPN, just days before the National Football League kicks
off its season on Thursday, and midway through the U.S. Open
tennis tournament.
    DirecTV has said it wants to change its offerings to cater
to consumer tastes in the streaming TV era. It is pressing
Disney to allow it to sell smaller, lower-priced packages,
including tiers without ESPN, for customers who do not watch
sports.
    "DirecTV believes that programmers need to collaborate with
pay TV distributors to deliver entertainment options that align
with consumer preference," DirecTV Chief Content Officer Rob
Thun wrote earlier this month, in an open letter to consumers.
    Disney has proposed multiple scenarios, including one
sports-centric offering that would combine ESPN and ABC,
according to one person familiar with its negotiating posture.
    "We're working hard to get it done. We want to get it done.
We want to deliver for sports fans," ESPN Chairperson Jimmy
Pitaro told Reuters.
    "We do believe that we bring a lot of value. And hopefully
DirecTV recognizes the value that we bring and we can continue
to serve our fans through their platform," Pitaro added.
    Such disputes between programmers and distributors have been
playing out for decades, though they have taken on a different
tenor in the age of streaming.
    The top pay TV providers have 67.7 million subscribers, down
about 22 million subscribers from the second quarter of 2019,
said Leichtman Research Group, as cable and satellite TV
customers gravitate to online streaming services. 
    DirecTV accounted for about half the net losses, Leichtman
reported.
    The entertainment companies have tried to strike deals that
keep the legacy cable-TV business generating profits as they
build their streaming services.
    For example, Disney agreed to allow Charter Communications
 CHTR.O  to distribute the Disney+, Hulu and ESPN+ streaming
services to its Spectrum TV subscribers, allowing the nation's
second-largest pay TV company to capitalize on the rise of
streaming. In return, Charter agreed to pay higher rates to
carry Disney's TV channels.
    "The new template that Disney and Charter agreed to has
reshaped the tone of some of these negotiations going forward,"
said MoffettNathanson media analyst Robert Fishman.
    Live sports have remained a programming mainstay that kept
subscribers paying their monthly TV bills. But sports are
rapidly exiting the cable bundle, with YouTube  GOOGL.O  paying
a reported $2 billion a year for rights to the NFL Sunday
Ticket, and Amazon Prime Video  AMZN.O  this year offering $1.8
billion to stream NBA games, starting in 2025.
    Three major programmers are planning to launch a new
sports-streaming service that could further threaten the
traditional pay TV business.
    Disney, Fox and Warner Bros Discovery announced earlier this
year they would combine their broad portfolio of professional
and collegiate sports programming into a single app, now known
as Venu Sports. Executives described the venture as a bid to
capture younger viewers who do not subscribe to pay TV.
    However, Pitaro acknowledged in a deposition that he
informed Disney's board of directors that the sports streaming
service, code-named "Raptor," would draw an estimated 67% of its
subscribers from pay TV. Despite this cannibalization, Disney
believes Venu will expand the number of people paying to watch
sports, the person familiar Disney's rationale said.
    A dispute over rights given to Venu Sports provides the
backdrop of Disney's current negotiations with DirecTV. 
    Rival sports streaming service FuboTV sued, alleging
anticompetitive behavior by the media companies that control 60%
of the rights to broadcast live sports in the U.S.
    At issue is a long-standing industry practice of "bundling,"
in which programmers distribute several of their networks
together, or not at all. 
    Fubo claimed it was thwarted in its efforts to provide a
sports-centric service because it was forced to also carry
non-sports networks that its customers rarely watch. Fubo sued
when the media partners behind Venu granted the coming streaming
service live sports rights they have yet to provide another
distributor.    
    A federal district court judge ruled Fubo is likely to
succeed in proving its antitrust claims at trial, and
temporarily barred the launch of Venu. 
    The media companies, which had hoped to launch Venu in
August, ahead of the start of the NFL season, appealed the
ruling on Aug. 23. They are asking the U.S. Court of Appeals to
expedite the process, saying the media companies have invested
about $74 million in a start-up business that has been blocked
from coming to market.

 (Reporting by Dawn Chmielewski in Los Angeles and Lisa Richwine
in Bristol, Connecticut; Editing by Richard Chang)
 ((lisa.richwine@thomsonreuters.com; Follow me on Twitter
@LARichwine; 1-424-434-7324; Reuters Messaging:
rm://lisa.richwine.thomsonreuters.com@reuters.net/))