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Charter, Spectrum Owner, Labels Pay-TV Model Broken in Battle with Disney over Blackout

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Charter and Disney Battle Over Contract Fees, Resulting in Pay-TV Blackout

Charter Communications and Disney find themselves in a contract fee dispute that has left millions of people without access to U.S. Open and potentially "Monday Night Football" coverage. The two companies have been engaged in ongoing negotiations, but have yet to reach a new agreement. As a result, Charter's Spectrum customers, including those who rely on broadcaster ABC and pay-TV channels like ESPN and FX, have experienced a blackout. While such battles are not uncommon in the industry, this particular dispute takes on a different significance in the age of streaming.

The Broken Pay-TV Ecosystem

Charter executives have labeled the pay-TV ecosystem as "broken," citing the need for a revamped deal that provides Charter cable customers with access to Disney's ad-supported streaming services, such as Disney+ and ESPN+, at no additional cost. While Charter claims to have accepted Disney's request for higher fees, the specific details of the negotiations remain undisclosed. Charter CEO Chris Winfrey highlights the staggering loss of nearly 25 million customers, or approximately 25% of the total industry customers, in the past five years, attributing it to the high cost of traditional bundles and the availability of more affordable streaming options.

The Changing Landscape and Future Business Models

The renewal of the contract between Charter and Disney in 2019 included the integration of Disney+, ESPN+, and Hulu into Charter's set-top boxes, aiming to enhance customer access to these streaming apps. Charter, primarily a provider of broadband and mobile services, expresses its commitment to the success of its pay-TV business, even if it takes on a different form. The company recently announced a sports-lite package, excluding regional sports networks but still including ESPN, at a cheaper rate. However, this option was not presented to Disney, and Charter sees its proposal as a "glidepath" toward a new business model that reduces the cost of the traditional bundle for customers who prefer it while driving more viewership to Disney's ad-supported streaming services.

The Future of Disney's Traditional TV Business

Disney CEO Bob Iger has acknowledged the challenges faced by the company's traditional TV business and has expressed openness to potentially selling those assets. However, ESPN Chairman Jimmy Pitaro emphasizes that ESPN's future lies in a way that does not abandon pay-TV distributors or eliminate the traditional pay-TV model that has long supported the business. While Disney has secured successful deals with other pay-TV companies, it remains committed to reaching an agreement with Charter. In conclusion, the contract fee dispute between Charter and Disney has resulted in a blackout for pay-TV customers, highlighting the challenges faced by the pay-TV ecosystem in the streaming era. The battle reflects the changing landscape of the industry and the need for new business models that cater to evolving customer preferences. As the negotiations continue, the outcome of this dispute will shape the future of pay-TV and streaming services, impacting both the companies involved and the viewers who rely on their content.

Implications for New Businesses

The ongoing dispute between Charter Communications and Disney presents a "hot take" for new businesses, particularly those in the media and entertainment sector.

Understanding Market Shifts

The shift from traditional pay-TV to streaming services underscores the importance of understanding and adapting to market trends. New businesses must stay informed about industry changes to ensure they remain competitive and relevant.
Customer-Centric Approach
The blackout experienced by Charter's Spectrum customers highlights the potential impact of business disputes on customers. New businesses must prioritize customer needs and strive to minimize any negative impacts on their customer base.

Adapting Business Models

The need for a revamped deal that caters to evolving customer preferences emphasizes the importance of flexible and adaptable business models. New businesses should be prepared to adjust their models in response to market demands and customer needs.

Conclusion

In conclusion, the dispute between Charter and Disney offers valuable insights for new businesses. It emphasizes the importance of understanding market shifts, adopting a customer-centric approach, and adapting business models. As the media and entertainment landscape continues to evolve, new businesses can leverage these insights to navigate their own challenges and opportunities in the marketplace.
Story First Published at: https://www.cnbc.com/2023/09/01/disney-charter-battle-over-spectrum-blackout.html
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