Back in 2019, Disney signed a new five-year deal with DirecTV to keep Disney’s linear channels available to subscribers and that deal is set to expire shortly.  The two companies should be in negotiations ahead of the deal expiring in September.  Should the two companies not come to an agreement, it could lead to a carriage dispute, as we saw with Spectrum Cable last year, where some channels became unavailable for a limited time.

Shortly after the channels went off the air on Spectrum, Disney announced it had made a transformative, multiyear distribution agreement with Charter Communications that would give Spectrum cable customers access to many of Disney’s core linear channels like ABC, Disney Channel, FX and National Geographic, in addition to an ad-supported tier of Disney+.   To go along with the new deal, many channels, including Freeform, Nat Geo Wild, Disney Junior and FXX, were removed from Spectrum cable packages.

Last year, after the new Spectrum deal was announced, at the LA Sports Innovation Conference, DIRECTV Chief Content Officer Rob Thun said that the new deal between Disney and Spectrum was “groundbreaking” and suggested that it set a precedent for all future carriage negotiations.

“As we look at deals going forward, we think that’s the exact model,”

Following the decision by a US Judge to temporarily block the launch of Disney’s new sports streaming service with Warner Brothers Discovery and FOX, there have been many ripples across the cable industry, as they look to try to disenable the cable bundle and offer a cheaper alternative for customers, where Disney doesn’t force more channels on customers than they want.

This week, Rob posted a blog on the official DirecTV site, addressing the need for cable change and hinting that they want the same deal as Spectrum and highlighting how cable hasn’t evolved along with streaming aka direct-to-consumer.

The entertainment ecosystem has recently undergone a significant transformation with the emergence of programmer-specific direct-to-consumer (DTC) services. This shift has given consumers a more comprehensive range of options to view content at lower individual prices. However, consumers have grown increasingly frustrated with their experience as DTC services have created significant fragmentation at higher cumulative costs.

Unfortunately, while DTC offerings have evolved, pay TV packages have remained largely unchanged. Instead of allowing distributors like DIRECTV to also develop smaller, more tailored packages at prices that reflect the value they get from the content, programmers have continued to impose and enforce strict bundling requirements through exorbitant minimum penetration rates – the minimum proportion of a distributor’s subscribers required to access a channel. These antiquated requirements force pay TV customers to subscribe to many channels they may not watch, which have yielded ‘fat bundles.’ At the same time, programmers have reserved flexible genre-based offerings solely for themselves, eroding the price-value proposition for pay TV customers by shifting the best programming to DTC services while raising programming fees on pay TV.

Venu, the recent joint venture across multiple programmers, is a perfect example. The programmers who created Venu – The Walt Disney Company, The Fox Corporation, and Warner Bros. Discovery – sought to bring a sports-centric streaming service to market until it was blocked last week by a U.S. district court on the grounds of severe antitrust concerns and the “near monopolistic control” that the Venu JV partners would exercise over the market. DIRECTV applauds Judge Garnett’s ruling that the creation of such a genre-based product should not rest entirely with these media giants. We agree with Venu’s shrouded market-sizing estimates that were unearthed during the trial that recognize an “ocean of opportunity” to offer consumers skinnier packages. However, we disagree with Venu’s anti-competitive strategy and believe that TV distributors should have the same flexibility to thrive alongside DTC services by offering genre-based packages that extend beyond sports to include locals, entertainment, news, family, movies, and others.

DIRECTV believes that programmers need to collaborate with pay TV distributors to deliver entertainment options that align with consumer preferences, including:

• Flexible Packages. Consumers want the ability to choose from genre-based programming without piecing together and purchasing an extensive lineup of channels that don’t meet their desires. 
• Lower-Priced Alternatives. Consumers want price points closer to the DTC options they are familiar with and the ability to pay for all their programming through one platform.
• Aggregated Experience. Consumers want access to their favorite shows and sports and the ability to discover new content in one complete experience – live ‘linear’ TV or on-demand content from DIRECTV or a third party – instead of through numerous disjointed entry points while managing multiple individual subscriptions to those products.

Pay TV subscribers have been declining because of our collective failure to evolve to meet consumer preferences, not due to external forces. Without fundamental change, costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer.

At DIRECTV, we can smoothly transition to a model that will provide consumers with more choice, control, and value to complement programmers’ DTC offerings. Distributors like DIRECTV have asked programmers for the flexibility to launch skinnier packages for years. It is high time that we work together to bring that ocean of opportunity to fruition. 

Ultimately, as cable customers continue to dwindle each month, as streaming is becoming the standard way for people to watch TV, these companies are looking at ways of slowing down or pausing the decline.  Studios are also happy to continue taking money from cable companies, but things are going to change. 

The recent blocking of Venu Sports will undoubtedly give some cable companies like DirecTV more leverage to try to get a good deal, but if their negotiations fail, this will impact customers. However, the studios also know that customers have more options than ever, and should DirecTV not offer the content customers want, they’ll move to other platforms like YouTube TV or Hulu + Live TV.  

Roger’s Take:  Should DirecTV get a similar deal to Spectrum, this is likely going to lead to a potential closure of channels like Freeform, as losing one of the biggest cable providers is going to drastically reduce viewership numbers.  Plus, as negotiations continue with other cable providers, who will likely want similar deals, those channels that were removed from Spectrum probably won’t last much longer.  Plus, this weekend, Disney announced it would be closing down its on-demand apps for its channels for cable customers, instead pushing customers to Disney+ or cable on-demand platforms.    There’s also the benefit for Disney, as should they sort a deal out to include Disney+ with ads, they can increase the amount of viewership and the amount of paid subscribers, locking them in for much longer, with less risk of churn.

Do you think Disney and DirecTv will make a deal in time?  Let me know on social media!

Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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