Deadline: Charter CEO Chris Winfrey Reports Little Progress In Carriage Talks With Disney, Says A Leaner TV Bundle “Could Stick” With Spectrum Customers

Story from Deadline:

Charter CEO Chris Winfrey indicated that little progress has been made in the week-long carriage fight with Disney and said a leaner, ESPN-free TV bundle “could stick” with price-sensitive Spectrum customers.

The exec updated investors on the epic distribution battle during a keynote session at the Goldman Sachs Communacopia + Tech Conference in San Francisco.

“If I had anything material to highlight, I would,” he said of the negotiations. “So that should tell you something.”

Eighteen Disney cable networks and eight ABC stations went dark last Thursday evening for Spectrum’s nearly 15 million customers after the parties were unable to reach a carriage renewal. “The video ecosystem is broken,” Winfrey declared during an investor call last Friday, adding ominously that “this is not a typical carriage dispute.” The rift between the No. 2 U.S. cable operator and the sports programmer that invented the concept of carriage fees has captivated the industry, with several other CEOs weighing in on it earlier in the conference.

Winfrey reinforced his conviction that Charter is committed to pursuing a permanent shift away from the traditional cable TV business if a Disney renewal is not reached. The company’s threat to do so last week sent shockwaves through the media sector, which is confronting accelerating cord-cutting and the emerging, less-profitable economic model of streaming.

While Disney is risking $2.2 billion in annual revenue from Charter, there is also the reality of customers fleeing elsewhere for TV at a time of big-ticket sporting events like college football, U.S. Open tennis and, come Monday, the NFL. Despite the threat of churn, Winfrey said as the impasse drags on, “our incentive goes down” to reach a compromise. “The average customer who remains isn’t going to be a sports customer. … If we’re moving on, that’s OK.”

Reiterating his concern that Charter is being “forced to deliver packages to customers that they don’t want or can’t afford,” Winfrey also raised an objection about the way programmers are using those proceeds. “Those very rich linear fees are then being funneled into direct-to-consumer products not available to them unless they pay twice,” he said.

In recent times, Charter’s management team viewed the company’s broadband business as a supplement to its video offering, Winfrey said. Now, “it’s on the verge of flipping,” with the video side “becoming a liability.”

Ultimately, in Winfrey’s view, “it’s going to be Disney that decides” the outcome. The “alternative world” without ESPN and other Disney content would yield “a smaller base of customers” but a more loyal one, Winfrey said.

“It would stick and it would actually grow from that point,” Winfrey said about a leaner bundle. Doing without Disney programming “wouldn’t mean that you couldn’t sell sports” via direct-to-consumer and SVOD outlets, he added. Disney has recently been ramping up efforts to roll out a full-bodied, stand-alone ESPN streaming service, with help from a distribution partner. That initiative has muddied the water with Charter and could complicate other pay-TV relationships. Bally Sports, the YES Network and other regional players have also launched stand-alone streamers and a Bloomberg report this week said Max would soon add sports as a premium add-on after initially including it at no extra charge to subscribers.

As a broadband provider, Charter could continue to help customers access sports programming, Winfrey noted. “That’s a pretty good picture,” he said. “Certainly great for the consumer and it could be great for us over time.”

On a broader level, the cable industry veteran acknowledged, a smaller bundle would represent a significant milestone. “I don’t think it’s good for the entire video ecosystem,” he said of a Disney-free Spectrum offering.