In September, Disney announced it had made a transformative, multiyear distribution agreement with Charter Communications that would maximise value for consumers and support the linear TV experience as the industry continues to evolve. The new deal 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, with more focus on offering the core channels, with a streaming service included.
As you might expect, other cable providers are looking to do something similar, and DirecTV is now looking to make a similar deal with Disney when its carriage contract is up for renewal in 2024. According to a report from Sports Business Journal during last week’s 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,”
While many customers have moved away from cable television, these new bundles will appeal to audiences, with access to traditional linear television channels and also core streaming platforms like Disney+. It’s also a big win for Disney, shifting more people onto the ad-supported version of Disney+, where it makes much more money per subscriber than in an ad-free version. While Disney+ isn’t making a profit right now, this shift from linear to Disney+ within the cable bundle will provide a much-needed financial boost to the division and, more importantly, maintain revenue that has been reducing year on year.
For a long time, cable distributors have felt it was unfair that subscribers had to pay twice and offering the lower-valued ad-supported versions of streaming services like Disney+ is a way of counteracting that. It’s likely other linear channel providers like Warner Brothers and Comcast will do similar offers in the future, which will force the cable providers to offer a more streamlined approach to how it showcases shows and films to their customers, with Rob explaining:
“What’s going to happen in deals going forward, we’re going to have a better integration of different apps into our linear experience … and provide more value to customers that frankly we thought was part of the underlying licensing of channels to begin with.”
However, as we’ve seen with the Charter deal, it’s likely that channels like Disney Junior, Freeform, FXX and Nat Geo Wild are at risk of closing, as should another major cable provider also look to drop these additional channels. While multiple channels from networks worked years ago, in a world with on-demand content, having these bonus channels isn’t as necessary. These channels have also bloated out how many channels are included in a cable bundle, and it’s likely we will see Disney focus its attention on its core channels, while also prioritising Disney+ and ESPN+. Thun explained
“Those channels now need to be rationalized. Instead of wasting resources for secondary and tertiary channels, why not plug that money into Disney+. There was a tradeoff of linear dollars for digital dollars.”
One of the best things for studios during the height of the cable era was that they worked out a way to make Americans pay for channels they didn’t need or want, but with the shift to streaming, that model is collapsing, but in offering their own streaming services like Disney+ instead of less popular channels, they will be able to maintain a level of revenue, especially, if they are tied in with internet packages and other promotions.
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