ESPN and other Disney-owned channels have shut down DirecTV after the two sides failed to reach an agreement on a new carriage deal, a business impasse that reflects the broader economic pain spreading across the pay-TV sector.
The outage, which came on a big college football weekend and during ESPN’s coverage of the U.S. Open tennis tournament, affected most of DirecTV’s more than 11 million U.S. subscribers. DirecTV said Disney made the decision to cut off service during negotiations. Disney executives claimed they had no choice as DirecTV refused to pay what it called market rates for its channels.
“While we are open to offering DirecTV the flexibility and terms we have offered other distributors, we will not enter into an agreement that diminishes the value of our portfolio of channels and television programming,” Disney said in a statement attributed to Disney Entertainment Co-Chairmen Dana Walden and Alan Bergman and ESPN Chairman Jimmy Pitaro. “We are investing heavily to deliver the No. 1 entertainment, news and sports brands because that is what our viewers expect and deserve. We urge DirecTV to do what is in the best interest of its customers and enter into a deal that will restore our programming immediately.”
DirecTV has blamed Disney for demanding higher prices, which the satellite TV provider will have to pass on to consumers.
“The Walt Disney Company is once again refusing to be held accountable to consumers, distribution partners and now the U.S. justice system,” said Rob Thune, chief content officer at DirecTV. “Disney is in the business of creating alternate realities, but this is the real world where we believe you earn your way and must answer for your actions. They want to continue to pursue maximum profits and dominant control at the expense of consumers – making it difficult for them to choose the shows and sports they want at a reasonable price.”
DirecTV also alleges that Disney is using its corporate influence in a draconian manner to force DirecTV to drop future claims that Disney’s “anticompetitive behavior” is a regulatory buzzword designed to pique the interest of DC watchers in this now very public commercial dispute. Disney and its two big partners in the Venu sports streaming bundle venture — Warner Bros. Discovery and Fox Corp. — are in the midst of litigation over the proposed sports service. A judge earlier this month issued a temporary injunction blocking the service from launching amid antitrust allegations made by independent sports company Fubo in a federal lawsuit filed in February.
In its lengthy press release on Sunday, DirecTV stated categorically: “Disney has demanded that DirecTV waive all claims that Disney’s conduct is anticompetitive in order to reach any licensing agreement or expand access to its programming. Furthermore, any future litigation arising from the licensing agreements between DirecTV and Disney will be decided in California — not New York — because — as Disney’s counsel specifically noted — Judge Garnett of the Southern District of New York “did not understand the issues” when he granted a preliminary injunction against Disney Venue Sports. Disney’s last-minute demands to prevent any legal accountability for its growing pattern of anticompetitive actions should be alarming to consumer advocates, regulators, and Justice Department lawyers alike.”
Disney and DirecTV have been in tense negotiations over a contract renewal for months. Disney had hoped to implement a sales agreement with DirecTV to support the Disney+ and Hulu streaming bundles that are the Mouse House’s top priorities at the moment. Disney worked that out in its hard-fought deal with Charter Communications this time last year after a 12-day hiatus.
Like other multichannel video providers, DirecTV is grappling with slowing demand for video services as viewers turn to streaming and free, ad-supported options for content that have proliferated in recent years. As such, DirecTV is taking a tough stance on raising fees for channels that are seeing declining viewership. And Disney’s focus on launching a standalone streaming option for ESPN — a longtime staple of the cable TV package — next year gives DirecTV little incentive to pay more for the service.
Unlike traditional cable operators, DirecTV’s satellite-delivered service isn’t ideal for providing subscribers with high-speed broadband. Under the Charter deal, Disney pays the cable giant some sort of fee every time a subscriber signs up through Charter Spectrum, where Disney+ and Hulu are offered as add-on options. DirecTV has much less incentive to help Disney pitch its streaming package to subscribers.
DirecTV’s Thune directly cited Disney’s strategic shift to direct-to-consumer platforms as a factor in the negotiations. “Consumer frustration is at an all-time high as Disney shifts its best producers, most innovative programming, best teams, conferences and entire leagues to its direct-to-consumer services while making customers pay more than once for the same programming across multiple Disney platforms,” Thune said in a statement.
The outage occurred around 4 p.m. PT on Sunday, just as ESPN was about to air the highly anticipated 2024 college football game between the USC Trojans and Louisiana State University Tigers.
DirecTV has pushed its programming partners to be more flexible in creating smaller, less expensive channel packages. ESPN and other sports channels are among the biggest drivers of annual programming cost increases for multichannel providers like DirecTV. Disney counters that the cost of sports rights is going up, not down (see last month’s $76 billion, 11-year NBA TV rights deal) and that it has been open to new options, such as the deal that ended the standoff with Charter Communications.
