Disney vs. DirecTV Is a Different Kind of Carriage Battle
We’ve seen it before: a cable or satellite provider and a content provider go head-to-head over a new carriage contract.
The latest such battle is between DirecTV and Disney. On Sept. 1, Disney channels went dark on DirecTV, smack in the middle of ESPN’s coverage of the U.S. Open, so customers of the satellite provider can no longer watch any offshoot channels of the sports streamer, as well as all ABC- and Disney-owned stations. (Let’s leave Disney+, etc. out of the equation, different thing.)
A carriage contract is an agreement in which the carrier pays the provider to carry the provider’s content (shows, certain ads, etc.). This happens at many levels, from local to national, and every once in a while the negotiations become so fraught the carrier takes the provider’s programming off “air,” resulting in a loss of service for viewers as both sides posture.
Both sides can, will and have already started the publicity battle, each blaming the other and appealing to consumers. DirecTV cries that Disney is trying to extort them by forcing them to purchase “packages” (as in, you can’t have ESPN if you don’t also buy ABC), while Disney screams that DirecTV is the enemy of the consumer for not agreeing to carry all of the content the company wishes to distribute.
So nothing to see here, literally and figuratively, right? Except this is not your daddy’s carriage fight. We have for years now been in the era of cord-cutting, streaming, à la carte content. That’s not new. What is new is that this latest stage will define the outcome — more, and differently, than ever.
Carriage agreements are mind-numbingly complicated and mind-bogglingly long, reaching deep into networks, cable providers, satellite providers, advertisers, guilds, unions and on and on.
Obviously, both sides are in it for profit, lest one think it's all about serving the consumer. And it’s no different here. But, wait, these days the customer actually is at the crux — and neither company in this new standoff quite gets that yet.
Disney will of course try to force its package/bundles down DirecTV’s throat, at increased fees, which DirecTV will then pass on to the consumer. DirecTV is not protecting its customers, just its balance sheet. And Disney is not serving is customers, as not everyone cares about a full suite of its owned channels. The couch potato staring at ESPN all day doesn’t wander over to National Geographic to see what’s on.
Historically, the preening goes on while consumers rage that they're paying for a service and getting less than they want with certain channels being dark. Eventually, a deal comes to pass, usually favoring the content provider and often after enough consumer backlash and public outcry force the provider to cave.
I submit, those days may be over, and that’s precisely the point. Packaging in an age where even content providers are breaking out their various offerings over a myriad of media means they now have less than their usual argument that a package is “mandatory” — therefore, less leverage than ever in a media/tech climate they themselves are fostering.
Carriers such as DirecTV are facing a situation in which their own services will be less in demand than on demand (sorry, couldn’t help that one), meaning consumer choices to access content are now so diffuse a service cannot justify passing on the same costs.
To some extent, DirecTV is the victim in this particular dispute, insofar as it is stuck fighting for consumer relevance in an era where the fees they pay will be more on the margins when advertisers and subscribers head to greener pastures. By the same token, while “villain” Disney can no longer claim with a straight face its packages are justified, it still believes (or does it?) that the old model can still carry on as if it’s 2005.
Thus, in the reality-check department, I would give the slight edge to DirecTV as it enters survival mode in a novel landscape, while Disney overestimates its ability to package its content. Disney clearly has programming that is both compelling and consumer driven, but it can’t have it both ways anymore. Consumers know it, DirecTV knows it, and Disney is learning it.
A new age is upon us. Viewers can subscribe to virtually anything they want on a more or less discrete basis, meaning what once drove carriage deals is now breaking them into pieces. In some ways, DirecTV is fighting an existential battle, and Disney will be forced to realize it can’t push packages when there is less of a market for them.
Part of this evolution is seen in the scramble to create new avenues for content and packaging. Witness the incipient attempt by Disney, Fox, and WBD to create the new sports co-venture Venu Sports. Despite its current legal challenge, Venu prompts the question of how Disney could also expect consumers to pay for ESPN on DirecTV? What might we miss? Probably not much.
Have you seen the recent Disney, Hulu, Max bundle offer? What might that be about? Have subscriptions “maxed” (see what I did there?) out, such that novel ways of appealing to consumers for subscriptions are the only viable path? Does it not suggest that trying to force bundles on traditional media (like DirecTV) are just no longer going to fly?
The expectations of Disney and DirecTV might make sense in a traditional carriage battle, but TV times are no longer traditional, nor are they as predictable. Both companies know this, but they underestimate consumer appetites and access, which are nothing like what once drove these deals.
I suspect what we’ll ultimately see is something slightly different — a nod to TV’s new age and a further move toward what will, for a time, be increased consumer choice. Disney will have to accept that DirecTV literally cannot survive on the old model and outcomes. How these companies put that genie back in the bottle, if they can, will be the next great battleground.
Gregg Ramer is a Los Angeles entertainment attorney who represents both talent and companies, in addition to having worked for two of Hollywood’s major guilds.
The latest such battle is between DirecTV and Disney. On Sept. 1, Disney channels went dark on DirecTV, smack in the middle of ESPN’s coverage of the U.S. Open, so customers of the satellite provider can no longer watch any offshoot channels of the sports streamer, as well as all ABC- and Disney-owned stations. (Let’s leave Disney+, etc. out of the equation, different thing.)
A carriage contract is an agreement in which the carrier pays the provider to carry the provider’s content (shows, certain ads, etc.). This happens at many levels, from local to national, and every once in a while the negotiations become so fraught the carrier takes the provider’s programming off “air,” resulting in a loss of service for viewers as both sides posture.
Both sides can, will and have already started the publicity battle, each blaming the other and appealing to consumers. DirecTV cries that Disney is trying to extort them by forcing them to purchase “packages” (as in, you can’t have ESPN if you don’t also buy ABC), while Disney screams that DirecTV is the enemy of the consumer for not agreeing to carry all of the content the company wishes to distribute.
So nothing to see here, literally and figuratively, right? Except this is not your daddy’s carriage fight. We have for years now been in the era of cord-cutting, streaming, à la carte content. That’s not new. What is new is that this latest stage will define the outcome — more, and differently, than ever.
Carriage agreements are mind-numbingly complicated and mind-bogglingly long, reaching deep into networks, cable providers, satellite providers, advertisers, guilds, unions and on and on.
Obviously, both sides are in it for profit, lest one think it's all about serving the consumer. And it’s no different here. But, wait, these days the customer actually is at the crux — and neither company in this new standoff quite gets that yet.
Disney will of course try to force its package/bundles down DirecTV’s throat, at increased fees, which DirecTV will then pass on to the consumer. DirecTV is not protecting its customers, just its balance sheet. And Disney is not serving is customers, as not everyone cares about a full suite of its owned channels. The couch potato staring at ESPN all day doesn’t wander over to National Geographic to see what’s on.
Historically, the preening goes on while consumers rage that they're paying for a service and getting less than they want with certain channels being dark. Eventually, a deal comes to pass, usually favoring the content provider and often after enough consumer backlash and public outcry force the provider to cave.
I submit, those days may be over, and that’s precisely the point. Packaging in an age where even content providers are breaking out their various offerings over a myriad of media means they now have less than their usual argument that a package is “mandatory” — therefore, less leverage than ever in a media/tech climate they themselves are fostering.
Carriers such as DirecTV are facing a situation in which their own services will be less in demand than on demand (sorry, couldn’t help that one), meaning consumer choices to access content are now so diffuse a service cannot justify passing on the same costs.
To some extent, DirecTV is the victim in this particular dispute, insofar as it is stuck fighting for consumer relevance in an era where the fees they pay will be more on the margins when advertisers and subscribers head to greener pastures. By the same token, while “villain” Disney can no longer claim with a straight face its packages are justified, it still believes (or does it?) that the old model can still carry on as if it’s 2005.
Thus, in the reality-check department, I would give the slight edge to DirecTV as it enters survival mode in a novel landscape, while Disney overestimates its ability to package its content. Disney clearly has programming that is both compelling and consumer driven, but it can’t have it both ways anymore. Consumers know it, DirecTV knows it, and Disney is learning it.
A new age is upon us. Viewers can subscribe to virtually anything they want on a more or less discrete basis, meaning what once drove carriage deals is now breaking them into pieces. In some ways, DirecTV is fighting an existential battle, and Disney will be forced to realize it can’t push packages when there is less of a market for them.
Part of this evolution is seen in the scramble to create new avenues for content and packaging. Witness the incipient attempt by Disney, Fox, and WBD to create the new sports co-venture Venu Sports. Despite its current legal challenge, Venu prompts the question of how Disney could also expect consumers to pay for ESPN on DirecTV? What might we miss? Probably not much.
Have you seen the recent Disney, Hulu, Max bundle offer? What might that be about? Have subscriptions “maxed” (see what I did there?) out, such that novel ways of appealing to consumers for subscriptions are the only viable path? Does it not suggest that trying to force bundles on traditional media (like DirecTV) are just no longer going to fly?
The expectations of Disney and DirecTV might make sense in a traditional carriage battle, but TV times are no longer traditional, nor are they as predictable. Both companies know this, but they underestimate consumer appetites and access, which are nothing like what once drove these deals.
I suspect what we’ll ultimately see is something slightly different — a nod to TV’s new age and a further move toward what will, for a time, be increased consumer choice. Disney will have to accept that DirecTV literally cannot survive on the old model and outcomes. How these companies put that genie back in the bottle, if they can, will be the next great battleground.
Gregg Ramer is a Los Angeles entertainment attorney who represents both talent and companies, in addition to having worked for two of Hollywood’s major guilds.