DirecTV and Disney Dispute Could Signal Major Shift in TV Industry

The ongoing dispute between DirecTV and Disney, initially over satellite TV distribution rates, is rapidly evolving into a broader debate about the future of bundled programming. According to Reuters, this conflict has left 11 million DirecTV customers without access to ESPN during the U.S. Open tennis tournament and just days before the much-anticipated “Monday Night Football” matchup between the New York Jets and San Francisco 49ers.

The backdrop to this battle includes a larger industry shift, with major media companies like Disney, Fox and Warner Bros Discovery planning to launch a joint sports streaming service called Venu Sports. Per Reuters, this service, which was initially slated to launch in August, aims to consolidate live sports programming from these media giants. However, the launch has been delayed by a court injunction following a lawsuit by FuboTV, a rival sports streaming service, accusing the companies of anti-competitive practices.

DirecTV’s Chief Financial Officer, Ray Carpenter, emphasized in a recent analyst briefing that this dispute is far from ordinary. “This is not the kind where people are haggling over percentage points on the rates,” Carpenter stated. “This is really about changing the model in a way that gives everyone confidence that the industry can survive.” DirecTV is pressing Disney to allow more flexibility in offering smaller, more affordable packages, including options without expensive sports channels.

Read more: DirecTV Faces Disney Blackout Amidst Antitrust Concerns

Disney, however, pushed back against DirecTV’s claims. “DirecTV continues to misrepresent the facts around our ongoing negotiations,” said Dana Walden and Alan Bergman, co-chairmen of Disney Entertainment, along with Jimmy Pitaro, chairman of ESPN, in a joint statement. The company stressed that their goal is to reach a fair agreement that acknowledges both the needs of DirecTV’s customers and the value of Disney’s content, which requires significant investment.

For decades, the television industry has relied on the practice of “bundling,” where distributors like DirecTV are required to carry less popular networks, such as Freeform, in order to secure access to highly sought-after content like ESPN. According to Reuters, these bundling agreements have historically supported the pay TV industry, especially as sports content continues to draw viewers even in the face of declining cable and satellite subscriptions.

However, the rise of streaming has significantly changed viewer habits, with sports content increasingly shifting to digital platforms. Major events, including the Olympics and professional sports leagues like the NFL and NBA, have moved online, threatening the traditional pay TV model. The introduction of Venu Sports could further hasten this decline, with industry analysts warning that its success could deliver a critical blow to the conventional pay TV bundle.

In court documents, Venu’s partners acknowledged that the service could attract up to two-thirds of its audience from cable and satellite TV. This shift mirrors previous industry changes, such as the concessions won by Charter Communications last year, allowing the company to offer a more streamlined programming package and distribute Disney’s streaming services, including Disney+, Hulu, and ESPN+.

DirecTV, on the other hand, remains focused on delivering video content directly to consumers’ homes, and Carpenter emphasized the need for a sustainable solution. “We need something that is going to work for the long-term sustainability of our video customers,” he stated, underscoring the high stakes of the ongoing negotiations.

Source: Reuters