ESPN and other Disney-owned channels have disappeared from view on DirecTV after the sides failed to reach an agreement on a new carriage deal, a business impasse that reflects the broader economic pain spreading through the pay-TV industry.
The blackout, which comes during a big college football weekend and during ESPN’s coverage of the U.S. Open tennis tournament, affects most of DirecTV’s more than 11 million subscribers worldwide. DirecTV stated that Disney made the decision to pull the plug while negotiations were ongoing. Disney executives argued they had no choice because DirecTV refused to pay market rates for its channels.
“While we are open to offering DirecTV flexibility and terms that we have extended to other distributors, we will not enter into an agreement that undervalues our portfolio of television channels and programs. We invest significantly to deliver the No. 1 brands in entertainment, news and sports because that’s what our viewers expect and deserve. We urge DirecTV to do what is in the best interests of their customers and complete a deal that would immediately restore our programming,” Disney executives said in a statement attributed to Disney Entertainment co-chairmen Dana Walden and Alan Bergman and ESPN Chairman Jimmy Pitaro.
DirecTV blamed Disney for demanding higher prices that the satellite TV provider will have to pass on to consumers.
“The Walt Disney Co. once again declines any responsibility to consumers, distribution partners and now the U.S. legal system,” said Rob Thun, chief content officer at DirecTV. “Disney is in the business of creating alternate realities, but this is the real world where we believe you earn your money and are accountable for your own actions. They want to continue pursuing maximum profits and dominant control at the expense of consumers, making it harder for them to select the shows and sports they want at a reasonable price.
Disney and DirecTV have been in tense negotiations for months about the renewal of the cars. Disney had hoped to implement a sales agreement with DirecTV to support the Disney+ and Hulu streaming bundle, which is currently the biggest business priority for the Mouse House. Disney was working in such terms on its hard-won pact reached this time last year with Charter Communications after a 12-day blackout.
DirecTV, like other MVPDs, is facing declining demand for video services as viewers move to pure-play streaming and ad-supported free content options that have exploded in recent years. As such, DirecTV is taking a tough stance on rate increases for channels that are seeing declining linear viewership. Disney’s focus on launching a standalone streaming option for ESPN — one of the longstanding mainstays of the cable TV bundle — next year gives DirecTV little incentive to pay more for the service.
Unlike traditional cable operators, satellite-delivered DirecTV is not optimal for providing subscribers with high-speed broadband services. With the Charter deal, Disney will pay the cable giant some kind of fee every time a subscriber signs up through the Charter Spectrum platform, where Disney+ and Hulu are offered as add-on options. DirecTV has much less incentive to help Disney pitch its streaming bundle to subscribers.