Variety: Disney Alleges DirecTV ‘Has Not Engaged in Earnest’ With Various TV Deal Options as Contract Expiration Looms

Story from Variety:

Disney‘s lineup of TV networks, including ESPN and ABC, could go dark for DirecTV subscribers as early as this Sunday if the two sides can’t come to terms on a renewed distribution deal. And right now, the companies are by all appearances far apart in the deal talks.

DirecTV’s agreement with Disney expires Sunday, Sept. 1. If there’s no deal or temporary extension by then, Disney’s networks could be pulled from DirecTV. The renewal talks come as the NFL season kicks off next month, with ESPN’s “Monday Night Football” set to return Sept. 9.

Justin Connolly, president of Disney Platform Distribution, said in an interview with Variety, “We continue to put a number of tangible options on the table, and DirecTV has not engaged in earnest at this point.”

“At the moment we’re far apart,” Connolly said. “The focus is on trying to hammer out details, and the ball is in their court.”

DirecTV has said it wants greater “flexibility” in how it packages Disney’s networks — and, according to Connolly, Disney has put forth various proposals, including a sports-centric package that includes ESPN and ABC and the option to bundle Disney+ and Hulu with DirecTV’s TV packages. “We’ve been trying to be flexible with different constructs that DirecTV might be looking for,” he said, including setting Disney’s September 2023 deal with Charter Communications as a template. “We’ve been iterating in the room to try to get this done.”

Disney’s last big carriage renewal was with Charter, after a 12-day blackout of Disney’s networks on Charter systems. Under that pact, select Spectrum TV customers are able to access Disney+ and ESPN+ for no additional charge. Spectrum continued to carry Disney-owned ABC television stations, Disney Channel, FX, Nat Geo and the full set of ESPN networks; however, the cable operator dropped the following channels from its lineup: Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo.

Regarding the Disney-Charter pact, DirecTV chief content officer Rob Thun has noted that Charter is paying for all eligible Spectrum TV subscribers to have the option to add Disney+ and ESPN+, but analysts have estimated that less than 10% of those have activated Disney+ and less than 4% have used ESPN+. DirecTV would want a deal under which it pays only for subscribers who take advantage of the streaming options.

About the DirecTV talks, Connolly said, “Our focus at the moment is to try to figure out if we can’t figure out something in the next four days…. What keeps coming up is this spin of, ‘We want something different,’ ‘genre-based options,’ without any specificity.” According to Connolly, any suggestion that Disney hasn’t been “innovative or constructive” is “just blatantly false.”

The negotiations between the two companies are being held in person at DirecTV’s headquarters in El Segundo, Calif.

A DirecTV spokesperson declined to comment but referred to a blog post by Thun outlining the company’s positions. Thun, in a post last week titled “Looking Toward a Brighter TV Future,” wrote that “programmers need to collaborate with pay TV distributors to deliver entertainment options that align with consumer preferences.”

Thun detailed three points toward achieving that goal: “flexible packages,” so that consumers can “choose from genre-based programming without piecing together and purchasing an extensive lineup of channels that don’t meet their desires”; lower-priced alternatives, with pricing more in line with direct-to-consumer streaming services; and an “aggregated experience” that combines linear and on-demand programming.

“At DirecTV, we can smoothly transition to a model that will provide consumers with more choice, control and value to complement programmers’ DTC offerings,” Thun wrote. “Distributors like DirecTV have asked programmers for the flexibility to launch skinnier packages for years. It is high time that we work together to bring that ocean of opportunity to fruition.”

As with other pay-TV operators, DirecTV has seen its subscriber base shrink dramatically over the last few years. The satellite TV and streaming service operator had 11.3 million subscribers (inclusive of AT&T U-verse TV) as of the end of 2023, according to estimates from Leichtman Research Group — down from a peak of 25.5 million at the end of 2016. DirecTV is majority owned by AT&T, with a minority stake held by TPG.

Disney’s Connolly claimed that in the discussions with DirecTV, “On the rates and economics, we are in line with other providers in the marketplace. It certainly reflects our content. Our goal is to resolve this in a way that benefits the Walt Disney Co. and the consumer, where they aren’t caught without access to our content [on DirecTV]. The rates proposed are consistent with other deals we’ve done in the marketplace.”

In his blog post, Thun cited Venu — the joint venture formed by Disney, Fox Corp. and Warner Bros. Discovery — as an example of a “genre-based product” (i.e., sports) that the media companies should make available to distributors as well. A federal judge last week issued a preliminary injunction barring Venu’s launch, siding with streaming provider FuboTV’s arguments that the JV was anticompetitive. (The three companies have appealed the ruling.) “[W]e disagree with Venu’s anticompetitive strategy and believe that TV distributors should have the same flexibility to thrive alongside DTC services by offering genre-based packages that extend beyond sports to include locals, entertainment, news, family, movies, and others,” Thun wrote.