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Disney-Altice Deal Shows Operators Will Still Pay for Sports

  • Tentative agreement keeps ESPN available for New York area
  • Disney is said to have won price increases for major channels

Walt Disney Co. and cable provider Altice USA Inc. reached a preliminary programming agreement that will enable 2.4 million New York-area pay-TV subscribers to continue to get ABC, ESPN and the Disney Channel.

The two sides “have extended the deadline accordingly to try and finalize the terms,” according to a joint email on Sunday. No details were included in the statement. The preliminary terms were struck at the last minute, as Disney was about to cut off broadcasting to Altice subscribers Sunday night.

Disney won price increases for its major channels, though not as much as the Burbank, California-based entertainment giant originally asked, according to two people familiar with the terms who asked not to be named because the discussions are private. Altice also agreed to pick up two collegiate sports networks, the people said.

The agreement, if finalized, shows that pay-TV operators are still willing to pay for pricey sports channels even in an age of video streaming and declining viewership. The talks were seen as a litmus test of the business model that’s fueled Disney’s profit for years: charging ever-higher fees for ESPN even though many consumers don’t watch sports, and using the network’s popularity to force pay-TV providers to carry other programming.

Disney shares rose as much as 0.6 percent to $99.20 in early trading in New York. The stock had declined 5.4 percent this year through Friday.

ESPN is the most expensive network for pay-TV operators, costing about $7.54 a month on average, according to data from S&P Global Inc.’s SNL Kagan. In all, 11 Disney-owned cable channels cost about $12.58 a month.

Bloomberg Intelligence’s Paul Sweeney reports on Disney’s deal with cable provider Altice.

(Source: Bloomberg)

Tone-Setter

The talks with Bethpage, New York-based Altice mark the first round of contract negotiations that over the next two years will cover more than half of Disney’s pay-TV customers. The deal with Altice could set the tone for Disney’s future discussions.

Altice, which operates pay-TV systems previously owned by Cablevision, had said Disney was trying impose “exorbitant” increases for ESPN and force customers who don’t want the sports channel to pay for it even though viewership has been declining. In recent days, both sides warned Altice subscribers they could lose ESPN, ABC and the Disney Channel if the companies failed to reach a new agreement. Disney ran ads in Altice’s markets telling viewers they could watch ABC for free over the air.

Altice will carry the SEC Network, which features games from schools in the Southeastern Conference, and the yet-to-be launched ACC Network, which features Atlantic Coast Conference teams, the people said. Altice will drop one lesser-watched ESPN channel, the people said.

Disney was asking for a large monthly fee increase for WABC, its local affiliate in New York. So-called re-transmission fees have been a huge source of profit growth for the broadcast networks, even though ratings have been declining.

Disney plans to launch an online sports network next year that will showcase games not seen on regular ESPN. The programming giant has lost revenue in recent years as consumers cancel their pay-TV service. Profit at Disney’s largest division, media networks, has fallen 11 percent this year, in large part due to escalating prices the company has agreed to pay for sports broadcast rights.

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