A contract dispute between Disney (DIS) and DirecTV has still not been resolved after the media giant drew its own and operated channelsincluding ESPN and ABC, last week from DirecTV.
The media blackout has already affected the start of the NFL season, including the first Monday Night Football game, in addition to college football.
In addition to ESPN, other affected Disney Entertainment channels include Disney Channel, Freeform, National Geographic and local news channels on the ABC network, which will host the first presidential debate between Donald Trump and Kamala Harris on Tuesday evening.
The core of the problem? DirecTV doesn’t want to offer (and pay for) all of these channels. It wants a “skinny” bundle, something media companies themselves have begun experimenting with amid a sharp decline in linear television viewers as more subscribers cut the cord and opt for streaming services.
“Everyone loses,” Needham analyst Laura Martin told Yahoo Finance’s Morning Brief on Tuesday. “Content and distribution are complementary networks. They both win together, and they both lose together. But this is inevitable as Disney continues to raise prices.”
“DirecTV wants to pay less [because] it has negative margins in the cable sector. These types of disputes will therefore become increasingly common.”
The dispute is similar to last year’s media fallout between Disney and broadband provider Charter Communications (CHTR), which fought to include more Disney streaming options in its bundled offerings.
The two sides ultimately reached an agreement in which Charter would offer a number of Disney streaming services – the ad-supported version of Disney+, ESPN+ and ESPN’s yet-to-be-launched direct-to-consumer offering – as part of select cable packages at no additional cost to the consumer.
But this time they are different bargaining chips.
“What makes it different is that DirecTV doesn’t have a broadband distribution company that they can somehow coordinate this with,” Macquarie analyst Tim Nollen told Yahoo Finance in an interview on Monday. “They are completely dependent on the pay TV ecosystem, and Disney is playing hardball on them because they can.”
In other words, DirecTV, which has more than 11 million subscribers, can’t offer streaming packages as part of its bundles. That makes the satellite cable provider less powerful in its negotiations with Disney.
“Charter could come up with cross-selling options for broadband packages,” Nollen explains. “They could put together this combination of linear channels with streaming for their paying TV subscribers, with DirecTV being the satellite provider.”
“They don’t have the same flexibility in terms of how they can get the content to consumers over a broadband connection. Without that, I think DirecTV is more limited in what they can offer.”
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