As boxing matches go, the bout between America’s “Cable Cowboy” and the House of Mouse is certainly an unusual one.
In one corner stands John Malone’s Charter Communications, one of the biggest cable television and broadband providers in the US.
In the other is Bob Iger, the revered boss of television and film juggernaut Walt Disney.
The two media giants have been locked in a dispute over money, with Disney channels yanked from Charter’s TV platform, Spectrum, as a result.
The blackout has left millions unable to watch the US Open tennis, with even player Daniil Medvedev saying he was forced to watch an illegal stream.
On the face of it, their bust-up is a classic “carriage dispute” over the fees that Charter pays to Disney to carry its channels.
Yet experts say the tussle may have far-reaching consequences for the future of television in the age of streaming platforms such as Netflix.
Most Charter customers first learned of the Disney row on August 31, when channels usually occupied by ESPN, ABC, National Geographic and other Disney brands on their set top boxes suddenly vanished.
In their place was a message reading: “The Walt Disney Company, the owner of this channel, has removed their programming from Spectrum.”
Bob Iger returned to the helm at Disney in 2022 to hammer the company's finances back into shape - LOIC VENANCE/AFP via Getty Images
The dispute is preventing nearly 15 million households from watching not just the tennis but also college football and other top fixtures, such as Monday night broadcasts of American football. It risks a backlash against both companies.
“We’ve almost always avoided these kinds of disputes,” said Christopher Winfrey, president of Charter Communications, during a call with analysts and investors last week. “But we had to draw a line in the sand.
“We respect the product that Disney produces, and its management team, but the video ecosystem is broken.”
Charter, which boasts 32 million customers across 41 states, says it was left with no choice but to pull Disney’s channels following lengthy and difficult negotiations with Disney over a new contract.
The company – which counts Liberty Media, Malone’s main business, as its top shareholder – says Disney is demanding more money for its channels but is refusing to give Charter’s customers access to its streaming service, Disney+.
The rise of streaming services has led to a surge in so-called “cable cutting”, where US households cancel their expensive cable packages and opt for lower cost streaming instead. The trend threatens the bedrock of his business.
Charter argues its customers are being double-charged for Disney programmes: once as part of access through their cable package, then again if they want to stream them.
Disney also wanted to allow “even less flexibility” in how its channels are packaged up into bundles, Charter claimed.
The company says it previously expected to pay Disney $2.2bn for content in 2023 but that the entertainment giant’s latest demands “ignore the realities of today’s video business”.
John Malone's main business Liberty Media is the top shareholder in Charter Communications - REUTERS/Rick Wilking
Over the last five years, the linear video industry – television broadcast to a schedule – has lost almost 25 million customers, or roughly 25pc of the previous total.
“It’s staggering,” Winfrey remarked.
Much of this is the result of services such as Netflix that have eroded the structural advantages enjoyed by linear TV providers in the past, says Tom Harrington, head of television at Enders Analysis.
In large swathes of the US, only one or two cable TV and broadband providers are available, resulting in higher prices compared to the UK and less choice.
A common practice has always been to bundle popular channels – such as Disney’s ESPN – together with less popular ones.
“For cable TV providers like Charter, it is about as bad as it has ever been,” says Harrington.
Meanwhile, many of the traditional content producers that have long licensed channels and programming to cable TV services are themselves haemorrhaging cash as they go toe-to-toe with Netflix by launching their own streaming platforms.
Disney+ offers viewers everything from traditional animated classics such as Cinderella and Beauty and the Beast to Marvel movies, Star Wars spin-offs and TV series like Atlanta.
Yet in its most recent quarter alone, Disney’s streaming operation lost $512m – taking total losses since its 2019 launch to $11bn.
Iger, who was the company’s boss from 2005 to 2020 and then returned last year, has been brought back to hammer its finances back into shape. Squeezing a little more money out of partners such as Charter can’t hurt.
Rival services include Paramount+, Warner Bros Discovery’s MAX and NBCUniversal’s Peacock face similar problems.
Many want to attract subscribers to their new streaming platforms by offering a library of content they can’t access elsewhere, while at the same time selling their content to cable TV providers.
In some cases, this has resulted in attempts to get around exclusivity deals with cable TV companies in ways that have raised eyebrows.
For example, CNN’s news programming is supposed to be broadcast first on the cable and satellite TV services it has deals with.
However, the channel has opted to make exclusive programmes to go on HBO’s MAX service to circumvent these restrictions.
Christopher Winfrey, president of Charter Communications, said the company was forced to ‘draw a line in the sand’ in its dealings with Disney
For Disney and its competitors, the fees from linear TV remain a vital source of income – bringing in far more than streaming does.
The Disney-Charter dispute should be seen in this context, says Harrington.
“Cable TV companies are under stress. But Charter probably thinks that Disney is under pressure too, and has calculated they can push it a bit further than if things were going well,” he explains.
“They also feel that Disney’s channels are not worth as much as they were during the last negotiations, because a lot of content is now on Disney+.”
Also hanging over the negotiations is Disney’s refusal to guarantee that cable TV customers who already pay for the ESPN channel will be able to access a planned on-demand ESPN service without paying extra.
“They want to require customers to pay twice to get content apps with the linear video they have already paid for,” Charter’s Winfrey said.
The row has parallels with a separate dispute playing out across the Atlantic, with customary British twists.
Here, the likes of the BBC, ITV, Channel 4 and Channel 5 have been grappling with pay TV providers and television manufacturers for years over so-called “prominence”, or where their own apps and content gets placed in key software menus.
For years the BBC has occupied the prestigious channels such as 101 and 102 on set top box services such as Sky and Freeview, but there are currently no hard rules on where TV makers such as Samsung should place them on smart TV menus.
Instead, manufacturers have struck deals that give companies like Netflix top billing – and even include “Netflix” buttons on their television remotes.
This new broadcasting land grab is happening amidst a once-in-a-generation shift in how people watch things.
Audiences are flocking online, particularly young people. Public service broadcasters are desperate to build up the following of their own services, including BBC iPlayer, ITVX and Channel 4 On Demand, amid a panic that they may be left behind by Hollywood juggernauts.
Ian Katz, chief content officer at Channel 4, recently defended a slump in the broadcaster’s so-called linear audience numbers, insisting that he was prioritising its streaming platform instead.
“Frankly, any broadcaster who obsesses about linear ratings now risks going the way of Kodak or Blockbuster – great brands that fail to notice that the ground was shifting under their feet,” he said at last month’s Edinburgh TV festival.
Back in the US, experts say Charter’s high-stakes punch-up with Disney could end up smashing the traditional pay TV model.
Disney, for its part, says it has offered “the most favourable terms on rates, distribution, packaging, advertising and more” in talks so far.
“Charter has refused to enter into a new agreement with us that reflects market-based terms,” the company claimed.
“We are on the edge of a precipice,” Winfrey said last week. “We’re either moving forward with a new collaborative video model, or we’re moving on.”
With fists raised, the only question now is who will blink first.
“We are on the edge of a precipice,” Winfrey said last week. “We’re either moving forward with a new collaborative video model, or we’re moving on.”
In a new statement on Thursday night, Disney accused Charter of “abandon[ing] their consumers” but said it “stands ready to resolve this dispute”.
Disney accused Charter of rejecting “multiple offers to extend negotiations before taking Disney Entertainment’s networks down” and said it had “proposed creative ways to make its streaming services available to Charter’s Spectrum TV subscribers.”
The media giant said: “The question for Charter is clear: Do you care about your subscribers and what they’re telling you they want – or not?”
