The carriage dispute between Charter Spectrum and The Walt Disney Co. has been dragging on for a long time.
According to executives at the cable company, which has just shy of 15 million video subscribers, the two sides had been talking for months about a “transformative” deal, one that they believe could help revive the pay-TV bundle and give it a new lease of life. to offer. “glide path” away from the rapid erosion enveloping the industry.
But if Disney and Charter fail to strike a deal, the cable company says it is willing to give up its video business altogether.
“We are on the edge of an abyss. We either move on with a new collaborative video model or we move on,” Charter CEO Chris Winfrey said on a conference call with Wall Street analysts Friday morning. “This is not a typical transport dispute. It’s important to Charter, and we think it’s even more important to programmers and the wider video ecosystem.”
It was a message reinforced by other executives, who warned that the entire pay TV system needs a reset, especially as programmers like Disney continue to pursue direct-to-consumer options. Perhaps most notably, Disney has indicated it plans to acquire its flagship ESPN channel — the most valuable asset in the pay-TV bundle — DTC in the coming years. Charter argues that this move would warrant a substantial rethinking of traditional transport contracts.
“When I talk about a glide path for Disney, that clears the way for ESPN to go direct to consumer in a way that is friendly and doesn’t completely cannibalize their larger linear video revenue,” says Winfrey. “It also works for us because it creates a glide path for us to create new marketing channels for new types of video products.”
“We respect the quality product Disney produces and its management team. But the video ecosystem is broken,” added Winfrey.
“For us, we are at a crossroads, economic indifference really, with our video product offerings and Disney is at a crossroads with its DTC apps and traditional linear TV strategy,” added Rich DiGeronimo, Charter’s director of product and technology.
Winfrey said that while he believes Disney is the right content company to forge a new TV business model, the horse-drawn battle currently underway over broader “transformation” will soon extend to other programmers as well.
But the company’s CFO, Jessica Fischer, also explained the financial risks to Charter, warning that the company is preparing for the possibility that the loss of Disney channels is “permanent.”
“About 25% of our total video customers are regularly engaged with Disney content, and about half of those customers are highly engaged with Disney content,” says Fischer. “We are currently working with the most engaged viewers to find alternative video solutions while Disney content is not available in our packages. And if the lock becomes permanent, the charter will move to alternative video solutions.”
What would those solutions be?
“We should look to our existing distribution platforms of Roku, Apple TV and eventually Xumo to create new general entertainment packages with more flexibility and the ability for consumers to add a la carte directly to consumer packages as they see fit” says Winfrey.
A possible model also comes from small regional provider Frontier Communications, which dropped its TV offerings and pushed its video users to YouTube TV. Earlier this year, a high-level TV executive told me THR that a major cable provider would exit the TV business by the end of the year, though they added they didn’t think it would be Charter or Comcast. But if Charter thinks about it, chances are every other provider does too.
Still, Charter hopes his press campaign will lead to a new deal with Disney: “We hope our shareholders will weigh in and support a better path forward for the video ecosystem,” says Fischer.
“If we fail to close a deal and eventually move away from the traditional video business, our company’s margin profile should improve and capital requirements should decrease,” added Fischer, noting that the stakes are much higher. can be higher for programmers.
