After a two-week blackout that left ESPN and a host of other networks dark in some 11 million U.S. households, DirecTV and Disney have come to an agreement on a carriage deal.
Financial terms were not disclosed, although in a joint statement released Saturday morning, the parties said they had agreed to “market-based terms” on pricing, and that DirecTV had negotiated the rights to carve out “multiple genre-specific packages,” including a la carte sports and entertainment options.
DirecTV will also offer Disney’s direct-to-consumer platforms (ESPN+, Disney+, Hulu) alongside the legacy linear-TV networks. Moreover, the satcaster has agreed to offer its customers the upcoming ESPN DTC service (code name: “Flagship”) which is set to launch next fall.
All told, DirecTV customers missed out on a single Monday Night Football game during the standoff, the Sept. 9 Jets-49ers opener. While Aaron Rodgers’ long-awaited return wasn’t particularly compelling—the 40-year-old gunslinger only threw two passes that traveled more than 15 yards, including a busted-coverage touchdown toss to Allen Lazard—the game still managed to deliver 20.43 million viewers across the Disney TV platforms. (ABC averaged 11.03 million viewers, ESPN brought in 8.53 million fans and the ManningCast contributed another 872,000 impressions.)
If the TV turnout for the 55th season premiere of Monday Night Football seems to suggest that Disney wasn’t greatly put out by the DirecTV standoff, the financial cost was not inconsiderable. Based on the estimated monthly carriage and retransmission-consent fees Disney collects from the satcaster, the Mouse House theoretically lost $46.4 million for each week of the blackout—a figure that does not factor in the short-term impact on advertising revenue.
That back-of-the-envelope estimate also does not include a reckoning of how many consumers Disney was able to “recapture” during the DirecTV outage. Fleet-footed conversions to MVPDs such as YouTube TV and Disney’s own Hulu Live TV obviously would help offset the losses on the DirecTV front, although clarity on how that all shook out won’t be in the cards until the next quarterly earnings period.
At an investor conference on Thursday, DirecTV chief marketing officer Vince Torres acknowledged that the company had lost “not an immaterial amount of customers” during the blackout.
All told, the terms reached were in keeping with the deal Disney and Charter worked out a year ago.
If this latest distribution dustup was settled in time to salvage football season, yet another major struggle is materializing elsewhere. Warner Bros. Discovery’s carriage deal with Comcast expires at the end of 2025, and TNT’s impending divorce from the NBA poses all sorts of challenges for the programmer. Even a modest reduction in monthly sub fees could wreak havoc; hypothetically, should Comcast manage to wrangle as much as a 25% rate reduction from TNT, that precedent would embolden every other operator looking to slash its own operating costs. In the early going, a universal reduction could very well amount to an annual loss of $621 million for TNT alone.
In the meantime, Disney and DirecTV’s peacemaking efforts will do little to halt the ongoing destabilization of the pay-TV industry. In the second quarter of 2024, cable, satellite and telco-TV providers saw their subscriber counts drop to 49.8 million households, bringing overall penetration of the legacy bundle to just 40% of all U.S. TV homes. Even when vMVPD subs are thrown into the mix, overall pay-TV penetration is at 55%, down from 86% just 10 years ago.
In the last year alone, 12% of traditional pay-TV subs cut the cord, an exodus that took some 7.01 million homes out of the bundle. In the span of five years, 35.6 million consumers have left the bundle behind, which marks an overall decline of 42%.
As America’s viewing habits evolve, the legacy cable networks are struggling to maintain their reach. After peaking at 101 million subscribers back in 2011, ESPN’s linear-TV network is now in around 66 million homes. Streaming platforms have helped win back a chunk of those lost sheep, as ESPN+ closed out the second quarter of this year with 24.8 million subs. Those in-house recaptures are only expected to improve as Bristol gets set to launch its standalone ESPN streaming product next year.
