The longer Charter’s major carriage dispute with Disney drags on, the less incentive the cable operator has to make a deal, CEO Chris Winfrey said on Thursday during an investor conference, where he also expanded on what video would look like in a future sans Disney content.
Disney channels went dark last week for Charter’s 14.1 million pay TV subscribers, including ESPN, just as the latest NFL season gets underway. Charter last week reiterated its view of a broken video ecosystem where it says programmers are raising rates and forcing channels into TV packages consumers don’t want and can’t afford, while simultaneously devaluing content by putting it on streaming platforms for lower prices, with products funded by those higher fees generated from its pay TV deals.
Charter proposed a new model to Disney that in part would involve agreeing to new rates if Disney also included its direct-to-consumer ad-supported apps to Charter pay TV subscribers for free, as well as lower minimum penetration rates and tying so that it could have more flexibility in video packages it offers to consumers. Charter would also promote to its broadband-only customers, putting marketing power behind the DTC apps, which it believes customers shouldn’t have to pay for as they already pay fees for the linear programming. It’s a model Charter said it will pursue in its deals with other programmers.
Speaking at the Goldman Sachs Communacopia + Technology Conference, Winfrey said Charter has always thought about the video business as being an asset to its larger broadband connectivity business but that he thinks “it’s on the verge of flipping it where it’s becoming a liability.”
Disney for its part rejected the new model and the same day Winfrey spoke at the conference put out its own latest statement that said it’s ready to end the dispute but also put blame on Charter, saying the cable operator rejected Disney’s multiple offers to extend negotiations before Disney networks went down on August 31.
Disney said that Charter “seems determined to functionally exit the video business with Disney entertainment” while denying millions of customers access to the content. Disney went on to say it “proposed creative ways to make its streaming services available to Charter’s Spectrum TV subscribers” including new and flexible packages. “Although Charter claims to value Disney’s direct-to-consumer services, they are demanding these services for free, which does not make economic sense.”
While Winfrey acknowledged a sense of urgency to resolve the dispute quickly, he noted there was nothing materially new happening in negotiations to highlight Thursday and believes at the end of the day it’s Disney who decides.
“It’s early in the game and as more video customers who value sports content, as they migrate to alternative sources, our incentive to actually go to do the deal we’re trying to do goes down, because the average customer who remains are not going to be the sports viewer,” he said.
One way or the other, Winfrey said it’s in everyone’s interest to make a decision quickly – and held firm that if that means moving on from video “that’s ok” while still stating he’s rooting in some sense for Disney to make a decision to move forward with a new model, with Disney in a unique position to lead, calling ESPN (which is inevitably going DTC itself) the linchpin. Even before the Disney dispute, Charter execs cited nearing indifference on the video business.
However, looking ahead if Disney and Charter don’t resolve their dispute, Winfrey outlined a view where general entertainment would be the remaining offer while sports, long seen as the stalwart of traditional pay TV would be more a la carte. That’s a take that Goldman Sachs’ analysts noted is the opposite of what many people long assumed would play out, where general entertainment would flock to streaming and sports continued to buoy pay TV long-term.
To Winfrey, the alternative world sans Disney “is pretty interesting” and “becoming more and more of a potential reality.”
At that point, he said there would be very little sports content Charter would renew, resulting in a smaller base of customers but with smaller entertainment packages that have a much better price.
“It would be a package of general entertainment content that customers actually wanted, watched, and valued,” he said, adding it would stick and grow from there.
And that’s not to say Charter wouldn’t sell sports at all, with Winfrey citing the ability to have a reseller virtual MVPD relationship with any on the market.
“That could be economically beneficial to us and it would be self-selecting for customers who are actually looking and willing to pay that type of price for sports content,” he added, while around that also selling direct-to-consumer and SVOD products.
As reported by NextTV, Charter has already pushed consumers with blacked out Disney channels toward vMVPDs that carry ESPN including Fubo and YouTube TV via QR codes.
He said with the ability to go to market “with that patchwork of video product,” broadband customers (of which Charter has around 28.5 million residential internet customers) could have a complete selection of what they want to buy.
When it comes to other programmers, as the issue does not only apply to Disney, Winfrey said the interest in what it’s proposing “is very high,” noting the company has already had multiple outreaches, with partners wanting to accelerate renewals or do something outside of renewals.
“I’m pretty confident that we can get this in place,” said Winfrey, regarding other programmers.
For a look at TVREV’s Alan Wolk’s take on Charter’s secret weapon in the dispute with Disney and why the analyst thinks Disney is playing with fire, read here.