For decades, carriage disputes have been a way of life for those still immersed in the cable bundle – a source of frustration as popular networks have been held hostage in staring contests between pay TV providers and major media companies, ending, inevitably, in rates going up for all customers. But what happened for ten and a half days at the start of September was unique, indeed unprecedented, in two different ways. First, this was the first time, at least in recent memory, a carriage dispute directly affected me. Second, and far more importantly, for all that these disputes have become more contentious over the years as providers have positioned themselves as trying to hold the line on increasing programming costs and keeping customers from paying for channels they don’t want, the company more responsible for both of those things than any other – Disney, and specifically ESPN – has been largely immune to such clashes, with cable providers too fearful of the blowback from losing the 800-pound gorilla in the sports world to risk losing it even for a moment. This, though, was the first time, possibly ever, that any major cable provider was willing to lose ESPN and the other Disney networks for as long as a week. And though the sides ended up making up just hours before a highly-anticipated Monday Night Football showdown, the much-anticipated debut (and, as it turned out, possible swan song) of Aaron Rodgers with the New York Jets, in the end Charter Communications and its Spectrum-branded services managed to win some significant concessions from Disney – concessions that could ultimately define the future of the cable bundle.
I’d dramatically proclaimed that past disputes or near-disputes with Disney potentially represented the end of the cable bundle as we knew it, and as Disney’s leverage continued to decay as more and more people left the cable bundle, it was perhaps inevitable that some provider would feel emboldened to take them on and at least attempt to sustain a prolonged dispute. Charter was in particularly prime position to stand up to Disney, having more leverage than Altice or Google with their extensive subscriber base, roughly 20% of American pay TV subscribers, and Comcast, one of the few companies with more, wasn’t likely to hold their ground to the same extent with their own cable network offerings. Other than the media company involved, though, there didn’t seem to be much that was different about this dispute compared to others as the public posturing ramped up over the course of August 30 and 31. Spectrum and Disney put up web sites pushing their respective sides of the dispute while Disney started running ads on its channels, Spectrum claiming it was holding the line against “excessive increase[s]” in the fees charged by Disney while Disney claimed it didn’t want customers to lose its valuable programming – all standard fare for disputes like these. Even as Disney pulled its signals from Spectrum systems right as the first game of the first full week of college football was about to kick off, the most likely outcome for most people probably seemed like the signals would remain pulled for less than 36 hours before Charter was compelled to reach an agreement before the bulk of the Saturday slate of college football games kicked off, similar to the last time Disney networks were pulled from a provider’s lineup.
That changed on Friday, September 1, when Charter released a slide deck and held a press conference expanding on their position. In Charter’s view, what’s ultimately broken the traditional cable bundle has been programmers flocking to start their own streaming services and premiering their marquee content there first, seemingly abandoning traditional linear networks, yet still continuing to demand the same rate increases from distributors they’d been collecting for decades – which would simply spur more cord-cutting. (Disney, for its part, claimed that its streaming services are “complementary”, not replacing, its linear networks.) “We still believe that a compelling Charter-branded video product offering can be a captivating part of our portfolio of connectivity services and appealing to customers,” said Charter in their slide deck, but the company had found itself at a “crossroads”, and if it couldn’t “create a path to a new economic and distribution model”, it would have to leave the traditional linear cable business entirely. Accordingly, Charter was proposing a new model whereby it would aggregate and sell various ad-supported streaming services to customers, allowing programmers to continue to maintain some form of their lucrative revenue stream from the cable bundle while maintaining a product that would offer value to consumers.
Charter felt Disney was an ideal partner to establish this new model, but that it was not only demanding traditionally high penetration minimums but wanted certain channels to be added to packages they weren’t already in – and that Disney had effectively crippled their leverage by publicly indicating that it was a matter of when, not if, the linear ESPN product would be offered direct-to-consumer. Charter would incur disruptions as a result of the blackout, and would have to handle calls from angry customers, but felt the long-term benefits would be worth it – indicating that it was ready for a long fight and wouldn’t cave in just because of a bunch of sports fans calling to cancel their subscriptions. In the press conference, Charter even indicated that it was prepared to leave Disney’s networks off its lineup permanently.
The idea that Charter might permanently force fans of the Disney networks, or even all of its linear TV customers, to streaming TV providers or other streaming services if it didn’t get its way was a stunning one, even if it wasn’t clear how much that was just a negotiating position. But if Charter was serious about getting out of the linear television business and becoming solely, or at least primarily, an Internet provider, I’m not sure how well that would work out for them. A month or two prior, my dad asked me to look into the prospect of dropping Charter’s cable TV services and switching to a streaming TV provider (with beIN Sports no longer a necessity with Serie A’s departure for CBS and the end of Lionel Messi’s run with PSG), and possibly also switching to Frontier for Internet on top of that. What I found was that 500mbps Internet service from Frontier, plus 12 months of YouTube TV included with the Frontier bill, was just over half the cost of combined (only 300mbps) Internet and TV from Spectrum. We didn’t switch at the time because my dad didn’t want to deal with the hassle of returning all our Spectrum equipment, bringing in a Frontier installer, figuring out how we were actually going to watch TV, etc., but if it started to look like Charter was serious about dropping Disney permanently, that would probably have tipped him over the edge into making the switch. (Charter did indicate that it would “take pains to preserve broadband relationships” with those that opted to drop video, implying that they would be willing to offer deep discounts if needed.)
Most observers felt that Charter wouldn’t lose many if any broadband customers in the dispute; as Ben Thompson put it, “a customer could be so incensed that they also change their Internet provider, but that is completely unnecessary and, given the inconvenience involved, highly unlikely.” But the prospect of saving $100 a month on Internet alone, without even getting into the cost of video services, is a tantalizing one. Charter could only get away with thinking they could keep all, or at least most, of their broadband subscribers without significant loss of profits because of the significant swathes of the country where they’re the only game in town, without any significant competing providers like Frontier; where such competition does exist, Charter might not want to find out how many subscribers were only sticking with them out of inertia and a desire to have true linear TV without streaming delays. (Thompson did acknowledge elsewhere in the above-linked post that video served as a “churn mitigation factor” for Charter’s broadband business. Meanwhile, while we’re on the topic, it’s worth noting that switching Charter’s video services for YouTube TV, while keeping Internet, would only save $10 a month after the first three months. I’ve long felt that if streaming TV providers had to be profitable and cable companies were serious about competing on price and features, the former wouldn’t exist, and it feels like we’re approaching that point. At this point, it feels like lack of competition has a lot more to do with high prices from the telecom industry than the bloated cable bundle does.)
Nonetheless, Charter’s presentation was a wake-up call to the entire industry (the day of the presentation, Paramount and Warner Bros. Discovery actually saw their stock decline more than three times as much as Disney on a percentage basis). It wasn’t just that Charter felt it could pick a fight with a company everyone had heretofore been too scared to go without for even the briefest of periods and win; this was a fight that stood to set the course for the future of the entire cable bundle. Either Charter and Disney would reach an agreement that would set the template for the rest of the industry, or Charter would effectively declare that the cable bundle had no future. At most, Charter CEO Chris Winfrey later noted, if Charter dropped Disney networks it wasn’t likely to keep other sports content, instead putting together “a package of general entertainment content that consumers actually wanted, watched, and valued” – but thanks to various mergers and acquisitions, the days of the “non-sports four” have given way to an age where AMC and A&E are the only major programmers that don’t offer sports on any of their channels (and that assumes A&E doesn’t have any influence from Disney and Hearst, the same owners of ESPN, being their co-owners), so Charter wouldn’t have much left where linear networks were concerned. Even if Charter eventually caved and gave Disney a mostly status-quo deal, the terms of engagement would have been set for future battles between distributors and programmers, and as cord-cutting continued the pressures for each side to hold their ground would ramp up.
There were additional reasons to think Charter’s position was serious; reportedly, Charter had been thinking about getting out of the linear television business as far back as their last round of negotiations with Disney in 2019, which ended up including provisions for distribution of Disney’s streaming services. Charter had arguably been setting the stage for this move ever since, joining with Comcast in a joint venture for Xumo last year, including an ad-supported streaming service and branded streaming boxes and smart TVs based on Comcast’s X1 platform; Winfrey indicated that Xumo could be part of their alternative video distribution plans if they ended up getting out of the linear video distribution business. And earlier this year, Charter announced that it planned to move regional sports networks, including its own networks in the Los Angeles area, to a higher tier and offer direct-to-consumer versions of them. Nor was Charter completely entering uncharted territory; smaller cable providers such as WOW! and (sort of) Cable One had dropped their video services, Frontier had stopped taking new video customers in favor of the aforementioned YouTube TV deal (as well as one with DirecTV Stream you almost have to already know exists to find on their web site), and Altice, with its two million customers, had explored options for their video business as well. For Charter to take that step would have been a far bigger shake-up to the media ecosystem than a bunch of small providers most people haven’t heard of, especially since Charter’s scale should have made video a better business for them than for anyone else, but the path had already been blazed.
Moreover, Disney’s leverage was drastically weaker than it had been even right before the pandemic, already weakened more than any other programmer by continued cord-cutting; a direct-to-consumer ESPN product had heretofore seen as an absolute last resort that would only happen if the cable bundle was well and truly dead before Iger and ESPN head Jimmy Pitaro started publicly talking about it as an inevitability, possibly coming as soon as 2025 according to some insiders, and Disney is reportedly asking for the option to launch such a service in all new carriage agreements with distributors. It’s understandable that cable operators would be reluctant to force all their video customers to pay $10 a month for something that was not only demanded by only a fraction of their subscriber base, but that their subscriber base won’t even need them for. That’s especially the case since according to Charter, only about 25% of their video customers are “regularly engaged” with Disney content, even after over a decade of cord-cutting clearing non-sports fans from the bundle.
On top of that, Charter’s position seemed eminently reasonable to many industry watchers, even the logical conclusion to the evolution of the streaming landscape in recent years. As every Tom, Dick, and Harry tries to launch their own streaming service, and as media companies have come under pressure from Wall Street in recent years to make them profitable, many wags have gone from suggesting that streaming was becoming as expensive as the old cable bundle was to seriously wondering if we were in for a “great re-bundling”, with someone coming along to package the most popular streaming services together and re-sell them at a discounted rate. Existing cable companies, in their role as ISPs and as stewards of the existing cable bundle, were logical choices to offer such a bundle, and it seemed a natural evolution of the cable bundle itself as content that was previously being offered on linear television channels was now being used to fuel their streaming services. In effect, this new vision would, compared to the old, pre-cord-cutting paradigm, amount to decoupling content from a traditional linear television schedule in favor of making on-demand access the primary means of accessing the content, while also allowing customers to gain access to their favorite shows directly from the producers if they only wanted one or two companies’ shows. Disney itself had established the precedent by bundling Disney+ and ESPN+ with Hulu+Live TV subscriptions, and the streaming service now known as Max being bundled with HBO linear subscriptions (and Paramount similarly offering Paramount+ logins to Showtime linear customers after that network rebranded as a premium tier of Paramount+) further served as a model, not to mention the period where Comcast was offering Peacock to all of its Xfinity TV subscribers.
Add it all up, and many analysts felt that Disney, not Charter, would be the one that would have to, and should, cave, which would have seemed unthinkable five years ago – despite the fact that, except for the NBA whose rights are up for renewal next year, all their most valuable rights are locked up through at least 2028, with the NFL, SEC, and ACC secure into the next decade, on terms that largely assume the current status quo. But a remade business model that also spreads to ESPN’s traditional linear television competitors won’t necessarily help ESPN that much with the NBA or other upcoming rights deals either, not with deep-pocketed streaming competitors like Amazon and Apple starting to show genuine interest in sports of their own. But it would still be far preferable to Charter leaving Disney’s networks off its lineup permanently – or getting out of the video business altogether, which would likely start a chain reaction that would leave the cable bundle almost the sole domain of sports fans, if that. (Losing Charter alone, just over the course of the dispute, left ESPN with around 55 million subscribers, close to the level that many analysts have said would be a tipping point that would lead to the bundle’s complete collapse.) In short, ESPN faces a fixed cost problem, and according to stock market analyst and longtime thorn in ESPN’s side Richard Greenfield, if they couldn’t reach a deal with Charter, “they will ultimately go bankrupt… [i]f their revenues and advertising collapse, they don’t have a business.”
Of course, ESPN could find a way to reduce the fees it pays sports leagues (and as I said in the 2016 post linked in the above paragraph, sports leagues may be motivated to work with them to do so)… but the question is whether they have clauses in their contracts that allow them to do that, can otherwise reopen the contracts to do that, or if they would have to do it the way Diamond Sports Group and its Bally Sports regional networks have been doing over the past several months and have its deals cancelled in bankruptcy court. And the way that’s working out for Bally, it might not work out well at all (though things might not, yet, be as bad as suggested in that link). No matter what, the NBA and other sports leagues with rights coming up for renewal over the next several years could be in for a rude awakening when they see how much ESPN is willing to pay this go-around – and TNT, NBC, Fox, and CBS wouldn’t be in any position to bail them out as they’d likely have to go through the same process. To this point, cord-cutting has only amplified the importance of sports to the cable bundle, but the Disney-Charter fight had the potential to mark the point where that would come to an end.
Of course, that doesn’t mean Charter’s vision isn’t without risks. On an immediate practical level, Charter implied and Disney gleefully pointed out that Charter was asking to carry Disney’s streaming services for no additional cost whatsoever, something probably unacceptable to Disney, but also almost certainly an opening position meant to be negotiated down. (There’s a difference between an ESPN streaming service being free to Charter and being provided for no additional cost to customers, one that will be relevant later, but for Charter to insist on the latter – to push ESPN onto every one of their video customers, repeating the folly that’s unraveling the cable bundle to begin with – makes no sense whatsoever, seems inconsistent with their stated position, and the former seems to be the most natural way to read both sides’ statements.) On a fundamental level, I hold the position that cord-cutting has always been about getting out from paying the sports tax, even if those engaging in it don’t realize it. As such, any sort of “re-bundling” would only work if it included an option for those that didn’t want to pay for sports, or else the new business model might as well amount to re-focusing linear television to focus on the sorts of live events that represent their biggest advantage over streaming, only with extra, distracting steps that would only serve to jack up the price. But the sports tax is too important to ESPN’s, indeed Disney’s, business model for them to accept that unless it had completely collapsed, so they’d only be interested in a deal that staved off that collapse as long as possible.
More immediately (and not unrelatedly), pretty much every streaming service that isn’t Netflix is burning money like there’s no tomorrow (not helped by the heavy use of discounts, free trials, and easy cancellation in the streaming space), and it’s likely that once the dust settles, the number of major streaming services can be counted on one hand. Many observers have started wondering whether it was a bad idea for legacy media companies to undermine the lucrative cable bundle by investing so much in streaming services that have failed to turn a profit, but it’s worth remembering that at the time these services were planned and started, the triumph of cord-cutting and the demise of the cable bundle seemed inevitable, and while it would have been more profitable to continue serving as “arms dealers” selling their content to the highest bidder, if streaming services became the primary if not sole means of viewing content – at the expense of not only linear television, but the theatrical movie business as well – and many of them produced their own, not controlling your own streaming service would have raised the question of what you were doing as an independent company at all. Even if they didn’t succeed, they had to at least try, and even if they lost billions of dollars for years, they had to eat those losses to get to a point where they could turn a profit and keep the company alive. In-house streaming services were seen as pivotal, indeed existential, for legacy media’s businesses. (Clay Travis suggests that legacy media “cut their own throat” by “destroying” “the best business in world media history”… in a piece that notes that cable bundle subscriptions peaked in the summer of 2014, before any of those legacy-media streaming services launched. The overall takeaway from his piece, to me, is that Netflix, not legacy media, killed the cable bundle; legacy media just flailed around for a liferaft.)
But now, as Wall Street loses patience with their lack of profitability, many of these legacy media streaming services are likely to fail and take their parent companies with them, limiting the value of any sort of “re-bundling”; of the legacy media companies, only Disney has the resources, brand name and identity, library of content, and thanks to their acquisition of BAMtech from Major League Baseball, technical expertise to make it on their own… and right now, even their streaming services are losing half a billion dollars a year, and $11 billion over the lifetime of Disney’s streaming division. (I felt HBO’s brand name and history of showing content from outside producers meant the streaming service now known as Max should be in good position to succeed, but it’s now apparent to me that mismanagement and a parent company that’s been dealing with financial troubles going all the way back to the ill-fated AOL-Time Warner merger will likely kill it as well. On the other hand, though, their decision to put TBS and TNT’s sports content behind a premium tier sometime next year, taking an approach closer to ESPN’s than Peacock’s or Paramount+’s, intrigues me.) A reimagined cable bundle may keep some of them afloat for a while longer, and maybe even keep one or two alive that wouldn’t otherwise survive. But if there ends up being only three to five general-entertainment streaming services worth signing up for, there’s less value in signing up for a service offering all of them. That’s especially the case because the logic behind a “re-bundling” in the first place seems flawed and may suggest analysts are stuck in the cable bundle mindset, not embracing the lessons of cord-cutting; though far from scientific, one cord-cutting blog reported that its readers typically subscribe to less than five streaming services.
With Disney hoping mass cancellations of disgruntled sports fans would bring Charter back to the table (or at least needing to figure out how serious Charter really was) but Charter being willing to eat those cancellations to bring themselves closer to a potential Disney-free future (Winfrey later acknowledged that the more customers cancelled their video subscriptions, the more “our incentive to do a deal is reduced“), the dispute continued throughout Labor Day Weekend, and with it, knocked out the entire first full weekend of the college football season. Charter began funneling disgruntled video subscribers to sign up for Fubo, and even, in a somewhat unprecedented move, started offering customers discounted rates for their first three months; by Monday, Disney belatedly started advertising Hulu+Live TV as its own suggested vMVPD. Some analysts suggested the Fubo offer was another sign that Charter was serious about getting out of the video business, but Charter was hardly the first distributor to direct people to vMVPDs to cover for carriage disputes, and that it was specifically Fubo that Charter was spotlighting was likely not a coincidence. Fubo doesn’t carry TBS, TNT, or the other former WarnerMedia networks, so it wouldn’t be a complete replacement for a Spectrum TV subscription. But MoffettNathanson reported that Charter was setting up a QR code to help people sign up for either Fubo or YouTube TV (the latter of which includes TNT and TBS, but not RSNs – Fubo carries the Bally Sports networks – or MLB Network, and unlike SlingTV or DirecTV Stream, isn’t controlled by a satellite provider that Charter’s more used to seeing as a competitor), and even help customers who sign up for these services drop Spectrum’s TV service, which genuinely would be a sign of how serious Charter was.
Still, most observers felt that for all the bluster, and despite little progress being made in negotiations, Disney and Charter would end up getting a deal done, and maybe even that “nothing would fundamentally or structurally change” about the cable bundle model as a result. The key date seemed to be ESPN’s first Monday Night Football game of the season, the Buffalo Bills and New York Jets that not only featured Rodgers’ Jets debut, but would fall on the anniversary of 9/11. The game would be simulcast on ABC, so most people in Charter territory wouldn’t be prevented from watching the game, but in New York itself, where the optics of people missing the game would be at its worst, ABC’s flagship station was among the blacked-out channels (though ESPN has also simulcast MNF games airing on ABC on ESPN+, as they would here and as they also did for the semifinals and finals of the US Open tennis tournament). Moreover, it wasn’t clear who the game was more important to, or whether there would be pressure to get a deal done before then or, conversely, whether both sides would wait to see what the impact of the game was before striking a deal.
But on the afternoon of the 11th, following hints by Greenfield on Saturday night, Charter and Disney announced that they had reached a deal. At first glance it might not have been clear which side got the edge or how much actually changed. Charter wouldn’t get Disney’s streaming services for free, but would get them at a discounted rate to bundle them in its packages for no additional cost to customers, with ESPN+ being included in “TV Select Plus” where Charter has begun placing regional sports networks. ESPN would have a penetration minimum of 85%, 80% once its direct-to-consumer version launches, not much different than what it’s enforced in the past, while increasing its fees, with the only word about Charter’s ability to offer packages without ESPN being the vague sentence “Charter will maintain flexibility to offer a range of video packages at varying price points based upon different customer viewing preferences”, which might not mean that they received any new flexibility at all (which was previously almost useless). Given those things, you could argue for either side coming out on top, maybe even give a slight edge to Disney for being able to maintain its penetration minimums. But then you find out that Spectrum’s “Essentials” package it offers to broadband-only customers, offering 25 channels for $25 a month, does not count its subscribers in the denominator of those penetration minimums… and then you find out that Charter would be dropping a whopping eight Disney-owned networks from its lineup.
Other than ABC and the ESPNs, the only Disney-owned networks available to Spectrum customers would be the Disney Channel, FX, and National Geographic Channel. That’s it. No more FXM, once Fox Movie Channel as Fox’s attempt to enter the premium channel, or at least TCM-level semi-premium, space. No more Disney XD, once positioned as a version of the Disney Channel for an older, male-skewing audience, and serving as the place where Disney premiered just about all its original shows that weren’t tween-girl-oriented sitcoms in the vein of Hannah Montana, including just about all its non-preschool animated shows. No Disney Junior, which Disney similarly once attempted to make a big push for by premiering prominent series on, still has a decent slate of original shows, and was once one of the most popular kids’ networks outside the “big three”. No more Freeform, which as the Family Channel, and later Fox Family and ABC Family, was one of the original legacy analog cable networks and as such was one of the most broadly distributed networks around. Perhaps most stunningly, no more FXX, which is still where new episodes of Archer and It’s Always Sunny in Philadelphia have been premiering (with Archer‘s final season starting the night before the blackout began), and at the moment, where they will continue to be. (Freeform, Disney Junior, and Nat Geo Wild also air original content, but they aren’t anywhere near as prominent or popular as Archer or Sunny, and significantly more people watch them on streaming services compared to those shows.)
In the late 2000s and 2010s, networks that couldn’t get enough popular programming to sustain an audience played cable network musical chairs looking for a format that would stick, with media companies not necessarily needing as many networks as they had but not wanting to give up a channel space that could still attract subscriber fees and that they likely wouldn’t get back if they relinquished it. As the 2010s went on and cord-cutting placed more pressure to make the cable bundle more attractive, media companies started being more willing to shut down networks entirely. Charter and Disney, however, just brought the music to a definitive end. Eight networks just effectively had their death warrant signed; they may stay on the air on non-Charter providers for now, but as carriage renewals with other providers come up they will surely want to be able to ditch those networks as well – and they will doubtless insist that other programmers follow suit as well. (Disney attempted to assure employees that it was still committed to those networks and wouldn’t be laying anyone off, but later effectively admitted that other distributors would be allowed to drop them. As an aside, Fox had been praised for “fleecing” Iger and Disney by selling their general-entertainment networks to them ever since it happened, but having all but two of the networks bought from Fox effectively pegged for eventual shutdown is probably the most concrete expression of that.) Had all of those networks been provided to all of Charter’s customers (as opposed to some only being available on higher or niche tiers), it would have come pretty close to paying for the streaming services Charter is adding.
You can see why Charter’s Chris Winfrey could say that “we achieved all of our objectives” despite all the stated objectives they seemingly didn’t achieve. Disney may have taken the position that its streaming services are “complementary” to, not a replacement for, its entertainment networks, but by effectively shutting down all but a handful of networks they’ve effectively conceded that yes, streaming services have replaced their linear networks. “The digital networks are for the most part targeted, and they super-serve an audience in the linear ecosystem, but they are also windowed onto what we are calling our primary channels,”, Dana Walden, co-chair of Disney Entertainment, told the Hollywood Reporter shortly after the deal was announced. “So you know the Nat Geo suite, ultimately that programming also airs on Nat Geo and then it is windowed over to Disney+, similarly with Disney Junior and Disney XD. And then FXX has been a valuable source of programming for Hulu…So for us what’s most important is that we’re maintaining channels where they are valuable to us in the distribution ecosystem, and then we’re making sure that we have a solid pipeline of that programming to Hulu or Disney+.”
Tellingly, while Disney’s entertainment networks were slashed to the absolute bone, all of the ESPN suite of networks remained intact; ESPNU and ESPNEWS remain part of Spectrum lineups where Freeform and FXX do not, even though ESPNEWS really only exists at this point as an overflow network for when too many sports events are airing on ESPN networks at once and airs reruns of various ESPN studio shows and shows created explicitly to be schedule filler the rest of the time. What we’re seeing, and what Walden hints at, is a key stage in the linear television lineup being refocused on what it’s good at: efficiently delivering live events that significant numbers of people want to watch at the same time to everyone, while also serving as a centralized place to premiere popular scripted and non-live programming, especially programming with significant social media chatter, before it appears at its true streaming-service home, with everything else being filler. FXX’s (and Disney Junior’s, and Nat Geo Wild’s) content could easily be inserted into FX’s (or Disney Channel’s, or Nat Geo’s) lineup, and the others were all rerun farms (or in the case of Baby TV, exceedingly niche networks that really only made sense in the context of linear television being the default destination for video content), so they were, effectively, redundant in the age of streaming services. What’s left is a network (or brand) to premiere kids’ shows (Disney Channel), a network (or brand) to premiere adult-oriented fare (FX), and a network (or brand) to premiere nature and sociological documentaries (Nat Geo), all before they end up “windowed” onto Disney+ or Hulu. (Despite the rhetoric, the non-inclusion of Hulu strongly suggests to me that that service’s future as a separate entity from Disney+ isn’t long for this world once Disney buys Comcast’s stake.)
Given this revised role, I could easily see these networks’ subscriber fees eventually being reduced or even eliminated, helping further ease the financial impact of taking on the streaming services. Disney wouldn’t accept that without a fight, but cable operators could persuasively argue that such networks aren’t strictly necessary with a Disney+ subscription, only serving to ease the strain on Disney’s servers.
Coupled with Charter now offering the ad-supported versions of Disney’s streaming services as part of its linear bundles, the future of the cable bundle is now taking shape. Streaming services are now the home for the entertainment content that once populated numerous linear cable networks, so they can now take those networks’ place in the bundle, allowing cable companies to play the role of the great “re-bundler” of those services. Linear entertainment networks now play the role of platforms for premier programs to make their debuts at a designated time for everyone, so there only needs to be enough to accommodate them all and provide distinct brands that make sense; meanwhile, live sports, news, and other events continue to demand that everyone watch them at the same time, so as many networks as are needed to accommodate them all can continue to operate.
Many observers felt that the deal was, at most, incremental, not transformative, not doing anything to solve the larger problems fueling cord-cutting and maybe making them worse, and it’s easy to see why; Charter still needing to force the vast majority of its video customers to pay the sports tax and fund ESPN means the deal did little to fix, and in fact reinforced, the cable bundle’s original sin. If this serves as a precedent that broadband providers looking to offer streaming service bundles must include ESPN in them, it’s effectively going to prevent them from meaning anything to cord-cutters, certainly those for whom companies like Charter are acting like overpriced monopolies despite the presence of cheaper competition, and if Charter is taking on a net increase in its content costs that, depending on the source, could be anywhere from 7% to 15%, and which it will likely pass on to customers sooner or later, it will only accelerate cord-cutting in the short term, while it’s not clear it’ll do much to address it in the long term, beyond help acclimate bundle subscribers to a streaming environment. For Charter, this was far from an unconditional win. But if it’s incremental, it’s perhaps the most important increment. The stage has been set for the cable bundle to evolve into a new form appropriate for the streaming era, one that should serve to help clarify linear networks’ place in it.
Great article Morgan!