The long-standing carriage dispute between Charter Spectrum and The Walt Disney Co. has been a topic of discussion and negotiation for months. Charter Spectrum, a cable company with nearly 15 million video customers, had been seeking a transformative deal with Disney that could potentially revive the struggling pay TV bundle and provide a way forward amidst the industry’s decline. However, if an agreement cannot be reached, Charter is prepared to exit the video business altogether.
Charter CEO Chris Winfrey emphasized the significance of the situation, stating, “We’re on the edge of a precipice. We’re either moving forward with a new collaborative video model, or we’re moving on.” This dispute goes beyond the typical disagreements over carriage terms and holds importance for both Charter and the broader video ecosystem.
The executives at Charter stressed the need for a reset within the pay TV system, particularly as programmers like Disney continue to explore direct-to-consumer options. Disney has expressed its plans to transition its flagship channel ESPN to a direct-to-consumer model in the coming years, which Charter believes warrants a reevaluation of traditional carriage agreements. Winfrey stated, “When I talk about a glide path for Disney, it clears the way for ESPN to go direct-to-consumer in a way that’s friendly, and doesn’t completely cannibalize their larger linear video revenues that they have.”
Charter recognizes the value that Disney brings as a content creator and respects its management team. However, they assert that the video ecosystem is broken and both companies are at crossroads – Charter with its video product offering and Disney with its direct-to-consumer apps and traditional linear TV strategy.
While Charter believes that Disney is the right company to shape a new TV business model, they also anticipate similar carriage disputes with other programmers in the future. If the loss of Disney channels becomes permanent, Charter’s CFO Jessica Fischer highlighted the financial risks and the need for alternative video solutions. Approximately 25% of Charter’s video customers regularly engage with Disney content, and losing those channels would necessitate finding alternative options. Fischer mentioned exploring existing distribution platforms like Roku, Apple TV, and eventually Xumo to create new packages for general entertainment, with the ability for consumers to add on a la carte direct-to-consumer options.
Frontier Communications, a small regional provider, previously dropped its TV offering and directed its video users to YouTube TV. This approach could potentially serve as a model for Charter if they were to exit the traditional video business. While it was predicted earlier that a major cable provider would leave the TV business, it was not anticipated to be Charter or Comcast. However, Charter’s contemplation of such a move suggests that other providers may be considering it as well.
Even with the option of alternative solutions, Charter is still hopeful that a new deal can be reached with Disney. Fischer stated, “We’re hoping that our shareholders will weigh in and support a better path forward for the video ecosystem.” If a deal cannot be reached and Charter does move away from the traditional video business, the company expects improvements to its margin profile and a decline in capital needs. The stakes, however, may be significantly higher for programmers.
In conclusion, the ongoing carriage dispute between Charter Spectrum and The Walt Disney Co. has sparked conversations about the need for a reset within the pay TV system. Charter Spectrum is prepared to exit the video business if an agreement cannot be reached, highlighting the significance of the situation for both companies and the broader video ecosystem. While alternative video solutions are being explored, Charter remains hopeful for a new deal that can lead to a better path forward.