Disney, DirecTV battle to reshape TV bundling (updated)

FuboTV

04/09/2024 17:44

(Adds comments from executives in paragraphs 6, 7)
    By Dawn Chmielewski
       Sept 4 (Reuters) - What began as routine haggling over
the rates satellite TV provider DirecTV would pay to distribute
Walt Disney's  DIS.N  television networks is turning into a
referendum on the future of bundled programming, executives and
experts said.
    DirecTV's current public battle with Disney has led to 11
million DirecTV customers losing access to ESPN in the middle of
the U.S. Open tennis tournament and a week before the New York
Jets are scheduled to meet the San Francisco 49ers on "Monday
Night Football." The dispute is taking place against the
backdrop of a competing plan by big media companies Disney, Fox
 FOXA.O  and Warner Bros Discovery  WBD.O  to launch a streaming
video joint venture devoted to sports, called Venu Sports.
    The service, which had been scheduled to debut in August,
would combine the breadth of the media companies' live sports
programming. The launch was temporarily blocked by a court
injunction as part of a lawsuit filed by sports streaming rival
FuboTV accusing the media companies of anticompetitive behavior.
    "This is not a run-of-the-mill dispute. This is not the kind
where people are haggling over percentage points on the rates,"
DirecTV Chief Financial Officer Ray Carpenter said on Tuesday in
an analyst briefing. "This is really about changing the model in
a way that gives everyone confidence that the industry can
survive." 
    DirecTV is demanding Disney give it the flexibility to offer
smaller packages, some without pricey sports channels to slash
the cost it has to pay Disney and how much consumers need to pay
for its TV packages.
    "DirecTV continues to misrepresent the facts around our
ongoing negotiations," according to a statement issued by Dana
Walden and Alan Bergman, co-chairmen, Disney Entertainment, and
Jimmy Pitaro, chairman, ESPN.
        "Our priority is to reach a marketplace deal that serves
the needs of DirecTV and their customers while also recognizing
the value of our top-quality content and the significant
investment required to create and acquire it."   
    Distributors like DirecTV and programmers such as Disney
have bickered for decades over rates as the cost of television
packages have soared.
    What has helped prop up the TV industry is the decades-old
practice of "bundling," or requiring pay TV distributors to pay
for and carry less-viewed networks, such as Freeform, to gain
access to the prized programming of ESPN. Contractual terms also
specify how broadly a distributor makes this content available
to its subscribers.
    Sports have historically provided a bulwark against the
decline of the pay TV industry, continuing to attract viewers
even as cable and satellite TV distributors shed subscribers.
    But as viewers migrate to streaming, sports has followed.
Marquee events, such as the just-ended Olympics, have moved to
streaming, along with professional sporting contests from the
National Football League and the National Basketball
Association.
    Venu threatens to further accelerate the decline of pay TV.
    "A successful launch of Venu could have spelled the death
blow to the traditional linear pay TV bundle," wrote
MoffettNathanson's Craig Moffett, using the industry term for
traditional TV broadcasts where programs are scheduled. 
    In court documents, Venu's media partners acknowledged the
sports streaming service could siphon two-thirds of its
customers from cable and satellite TV.
    The nation's largest pay TV company, Charter Communications,
won some concessions last year from Disney. It negotiated for a
skinnier package of programming and gained rights to distribute
Disney+, Hulu and ESPN+ to its Spectrum TV customers who want
access to streamed content.
    DirecTV, though, is purely in the business of delivering
video into consumers' homes.
    "We need something that is going to work for the long-term
sustainability of our video customers," Carpenter said. "So, the
resolve is there."

 (Reporting by Dawn Chmielewski in Los Angeles and Harshita Mary
Varghese in Bengaluru;; Editing by Richard Chang)
 ((mailto:Dawn.Chmielewski@thomsonreuters.com))