A programming-related dispute between the Walt Disney Company and pay TV provider DirecTV could impact the ability for some residential and business customers to access professional football games, a DirecTV executive warned this week.
The dispute started on September 1 when a carriage agreement between Disney and DirecTV lapsed. Without a new agreement in place, DirecTV was forced to pull Disney-owned channels like ESPN, Freeform, FX and National Geographic from its namesake satellite and streaming service, as well as DirecTV-owned U-Verse (formerly AT&T U-Verse).
ABC-owned broadcast stations in eight cities — New York, Chicago, Los Angeles, San Francisco, Philadelphia, Houston, Raleigh-Durham and Fresno — were also dropped from DirecTV’s satellite service, while all ABC stations and affiliates were removed from DirecTV Stream and U-Verse. Disney negotiates carriage of ABC affiliates on Internet-based TV platforms like DirecTV Stream and U-Verse through an arrangement with the ABC affiliate board.
The situation means DirecTV and U-Verse customers across the country lost access to college football games and other sports programming on ESPN during the Labor Day weekend, a situation that continues today.
Related: Why the DirecTV-Disney dispute is unlike any other programming blackout
That dispute has the potential to keep millions of DirecTV and U-Verse subscribers from also watching a highly-anticipated match-up between the San Francisco 49ers and the New York Jets on September 9. The game is being televised by ESPN and ABC as part of the “Monday Night Football” franchise, which Disney holds the telecast rights to until 2032.
Like other NFL broadcasters, Disney apparently times its carriage contracts with cable and satellite platforms to coincide with the start of football season. With football being among the most-watched programming on television in the United States, Disney executives feel they have immense leverage to raise distribution fees on cable and satellite providers and dictate other terms in exchange for the privilege of offering ABC and ESPN to their subscribers.
Those other terms usually also include a requirement that ESPN be placed in a base programming package alongside other channels like FX and Disney, even if customers don’t want to receive them.
DirecTV executives say that model no longer works in the era of streaming. They complain programmers like Disney are siphoning off TV shows and events for their own streaming services, while overcharging sports fans and other TV viewers to receive channels they may not want.
In an interview with The Desk last week, DirecTV’s Chief Programming Officer Rob Thun said it was time for Disney to embrace the idea of grouping channels based around key genres — sports, news, entertainment and others — and allowing customers to purchase bundles of channels based on their interest, rather than forcing customers to pay for channels they never watch.
On Tuesday, DirecTV’s Chief Financial Officer Ray Carpenter restated this position, noting that the company is willing to do battle with Disney for as long as it takes.
“This is not a run-of-the-mill dispute,” Carpenter said on the call. “We’re not playing a short-term game. We need something that is going to work for the long-term sustainability of our video customers. The resolve is there.”
For its part, Disney says it is willing to afford DirecTV some flexibility when it comes to a new distribution agreement, including one the entertainment giant inked with Charter last year.
That arrangement allowed Charter to drop certain lesser-viewed Disney networks like Freeform and FXM from its Spectrum TV plans, while also giving subscribers access to the ad-free versions of Disney-owned streaming services like Hulu and Disney Plus. The agreement followed a week-long programming blackout that involved Charter removing all Disney-owned channels and several ABC-owned broadcast stations from Spectrum TV, similar to the dispute that now involves DirecTV.
But things have changed over the past year, DirecTV executives affirm. When Charter and DirecTV were feuding, Disney had not revealed its intention to sell access to its sports-inclusive broadcast and cable networks on its own.
In February, the company did just that when it announced a partnership with peer broadcasters Fox Corporation and Warner Bros Discovery (WBD) to launch Venu Sports, which aimed to sell streaming access to Fox and ABC stations, as well as sports-heavy networks like ESPN, Fox Sports 1, TBS, TNT and Tru TV, without general entertainment and news channels.
After years of forcing cable and satellites companies to take all channels as a condition of carrying any of them, three of the biggest entertainment companies were now willing to sell direct access to certain channels on their own — without the cable middleman, and at an introductory price of less than $50 per month, far lower than the cost of any other service that carries ESPN and the other sports channels.
That isn’t fair, DirecTV says. The pay TV distributors that helped these entertainment companies now feel they are being short-changed.
Customers will feel that pain, too. The loss of Disney-owned channels on DirecTV will not just impact millions of customers who will be unable to watch Monday Night Football and other ESPN sports programming in their homes — it will also impact hundreds of thousands of bars, restaurants, hotels and other public spaces that utilize DirecTV to bring live sports to their giant screens, and who have also lost access to ESPN and ABC.
The last time this happened was last winter, when DirecTV was forced to drop dozens of broadcast stations owned by TEGNA, including those affiliated with ABC and other networks that air football. DirecTV tried to ease the burden on its enterprise customers by offering to install free antennas at bars, restaurants and other establishments, which allowed those customers to pick up stations for free, independent of their DirecTV service.
This time around, antennas won’t cut it. While Disney committed to simulcasting most of its Monday Night Football games on ABC last year, the company has signaled its intention to pull back on the number of football games that are simulcast between ABC and ESPN, relegating most of them to the cable network. (The first Monday Night Football game this season will simulcast on ABC in most areas.)
At first glance, it appears Disney holds all the cards. But it also has commitments to the NFL as part of its telecast agreement, and its reach will be slightly impacted by the loss of carriage on DirecTV. That probably won’t be enough to knock Monday Night Football from its rank as the most-watched prime-time program next Monday — it absolutely will be — but it does mean that its overall viewership will be slightly less than what it otherwise would have been if the company was amenable to a temporary extension that kept ESPN and ABC on DirecTV’s systems.
That said, DirecTV doesn’t have much ammunition in this fight. The company’s subscriber base across its three TV services is under 10 million, by some estimates, down from around 21 million just a few years ago. Streaming upstarts like Fubo, YouTube TV and Disney-owned Hulu with Live TV have chipped away at its customer base, just has they have done with other cable TV services and Dish Network. DirecTV customers who take advantage of free trial offers to access any of these services in order to watch Monday Night Football might find they like them more than DirecTV, and that could convince them to cancel their satellite, U-Verse or DirecTV Stream service altogether.
