Earlier today, Disney and Charter Communications announced they’ve come to a new multiyear distribution agreement that maximizes value for consumers and supports the linear TV experience as the industry continues to evolve. As part of the deal, the majority of Disney’s networks and stations will be immediately restored to Spectrum’s video customers.

As part of the new deal, in the coming months, the Disney+ Basic ad-supported offering will be provided to Spectrum customers who purchase the Spectrum TV Select package. At the same time, ESPN+ will be provided to Spectrum TV Select Plus subscribers. However, in order to achieve the content from Disney+, some networks, including Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild and Nat Geo Mundo, will no longer be included in Spectrum TV video packages.

Following the announcement, THR spoke with Dana Walden, co-chairman of Disney Entertainment, about the deal, who revealed some additional details on the deal, including removing some of the Disney channels from the bundle.

“I think if we’re learning anything in this moment, it is that we need to remain flexible, that these models are changing rapidly, that keeping up with technology and the consumer means we have to stay flexible and agile.

When we looked across the portfolio to try to identify where the greatest value in this deal was to us, we definitely made some trade-offs with the following thinking in place: The digital networks are for the most part targeted, and they super-serve an audience in the linear ecosystem, but they are also windowed onto what we are calling our primary channels [Disney Channel, FX, Nat Geo]. So you know the Nat Geo suite, ultimately that programming also airs on Nat Geo and then it is windowed over to Disney+, similarly with Disney Junior and Disney XD. And then FXX has been a valuable source of programming for Hulu, and so we don’t intend to change how we program that channel right now. It’s very much connected to our pipeline of general entertainment to Hulu.

We had already looked at the environment and were windowing, we were both offering a hyper-targeted environment for only preschoolers or, on Freeform, for the adult female demographic, but we were also windowing to our streaming platforms. So for us what’s most important is that we’re maintaining channels where they are valuable to us in the distribution ecosystem, and then we’re making sure that we have a solid pipeline of that programming to Hulu or Disney+.”

This sounds very much along the lines of Disney prioritising its core channels (FX, Nat Geo, Disney Channel) over the smaller channels and giving Spectrum the streaming services, but taking something away, that they maybe looking to make changes with in the future.  With Dana stating that they’ve:

“We protected our primary entertainment channels.  You know, they’re very important to our bottom line and our pipeline of family and general entertainment content to our DTC services.”

The new deal also allows Spectrum subscribers on the higher priced Select Plus T Vtier to have access to ESPN+, which allows Disney to keep developing their new flagship direct-to-consumer streaming service, while protecting the current linear system.  ESPN chairman Jimmy Pitaro explained:

“Let’s create this opportunity to expand that ESPN platform so that ultimately when we do take our primary channels direct-to-consumer, we have the opportunity to upsell that offering to a much larger sports fan base. Of course, ESPN has benefited tremendously from the pay TV ecosystem, and while the company is thinking about streaming, it isn’t giving up the golden goose just yet.   The first [priority] was protecting the traditional business model, one that’s been very, very good to us and continues to be good to us.  And we were able to do that, we secured commitments that were very strong in terms of rates and minimum penetration.

Just on a macro level, this idea of expanding ESPN+ — not flagship, but the current product — expanding ESPN+’s reach will help us continue to ease sports fans into this direct-to-consumer environment,” Pitaro says. “Another point is ad inventory, with expanded reach comes expanded ad inventory, and we have a fantastic sales team. There’s a lot of demand for sports content. And we’re confident that we’ll be able to sell that inventory.

If you were to speak to any league, any college conference, commissioner, they’ll tell you their number one priority is to expand their audience,” Pitaro says. “They’re constantly looking at ways to expand their audience. And so for us to be able to say to our ESPN+ partners today that we expect significantly expanded reach, that helps us in terms of our partner relationships and our ability to secure rights going forward.”

The addition of the ad-supported tier of Disney+ and ESPN+ to Spectrum customers is going to provide the streaming platforms with some new users, which will also help Disney’s advertising business, Dana explained the benefits for them from this new deal:

“We need to keep growing our streaming business, that is a focal point of our strategy right now. And this deal gives us the ability to have Disney+ basic distributed to Charter’s nine and a half million Select subscribers, which is great for us and enables us to grow subscribers, revenue, our advertising business, and it also lets us maintain our primary channels on the linear entertainment side, which are important to driving revenue.”

The other interesting thing for Disney+ and ESPN+, is now they’ve basically secured 15 million subscribers each month, though it’s likely many are already existing subscribers, so there will be some adjustments when Disney+ launches within the Spectrum bundle.  While Spectrum will be paying a discounted fee, they are still paid subscribers.  This fixes multiple issues for Disney+, giving them the security of subscribers and more people watching the ad tiers to sell more advertising.  Disney has effectively kept its core channels and offered its Disney+ with ads in exchange, which will also likely happen with other cable providers moving forward, now they’ve seen Spectrum get the same deal.

What do you think of this move by Charter and Disney?  Let us 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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