This week, just before the return of Monday Night Football, Disney announced that it had made a transformative, multiyear distribution agreement with Charter Communications to offer Spectrum cable customers a selection of linear channels, including Disney Channel, FX, National Geographic, ABC and ESPN, alongside access to the ad-supported tier of Disney+ and ESPN+.
The deal allows Spectrum customers to have access to many of the great Disney channels, but also boosts the reach of Disney+ to millions of new subscribers. This new deal is a big shift in what Disney offers cable networks, with audiences now watching more content on streaming platforms than on traditional linear, but still offering that content. However, in exchange for access to the ad-supported tier of Disney+, a number of channels are no longer being offered to Spectrum customers, including Freeform, FXX, FXM, Nat Geo Wild, Disney Jr and others.
Instantly, those channels have now lost about 20% of their potential audience, with 15 million Spectrum customers no longer having access to them, and there are now many questions hanging over the future of those linear channels. Since, as you might expect, other cable providers are likely to want to offer a similar deal, to unbundle some of the less popular channels which were forced into the cable bundle with ESPN.
Recently, while appearing on The Marchand and Ourand Sports Media Podcast, Disney’s Justin Connolly was asked whether this new deal provides a blueprint for other distributors like Comcast and DirectTV,
Yeah, I think this straight answer, is that it certainly can be, and in many ways, especially on the sports side, we think about it in those terms, and whatever we might do with Charter, is something we’d strictly we be willing to do industry-wide. I think we really believe in the value related to the sports content and for ESPN specifically. And how the template with Charter could be used with others. I think maybe the only asterisk that I’d put on that is, that we’re also aware and appreciate that different partners have different businesses and different interests, I mean, Direct TV and Dish are very different from Charter. The same with AT&T and Verizon, or YouTube TV and Hulu+Live TV, they are all very different in terms of their business aims and goals, but from our perspective, there is a template here that could work for all, and ultimately, we framed that through the eyes of the consumer. I think we have a proposition that works well for the consumer, as we think about consumption patterns and where they’re heading.
Only earlier this week, Disney’s CEO, Bob Iger, spoke about how the linear business wasn’t core to the company any more and they were looking at streaming as the future. Internationally, Disney has already closed many of its linear channels, focusing all of its content on Disney+.
There are many other advantages for Disney to offer an ad-supported tier of Disney+ to cable providers in bundles, since this drastically increases how many people are subscribed, since while Disney is just getting the wholesale price for Disney+, which is lower than if a consumer goes directly, they are still getting millions of subscribers, who may not even be watching it.
But more importantly, Disney is still going to be able to get additional revenue from its advertising, so the more people watching Disney+ through the ad-supported tier, the more money they will make and ultimately, this is the focus on the future of their streaming service. Later this year, Hulu content will also be available within Disney+, as the two platforms are set to merge once eventually, once Comcast’s stake in Hulu is purchased by Disney, which will provide even more content for viewers with Disney+.
This new deal with Charter, is going to become the standard blueprint for cable providers for years to come, as they look to reduce the costs by removing less popular linear channels, but fill the space with streaming services. And it’s likely other streaming services will start doing the same.
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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.