Too Much TV: Your TV Talking Points For Tuesday, September 3rd, 2024

Disney & DirecTV Square Off In Carriage Battle. You Should Be Rooting For DirecTV

Here's everything you need to know about the world of television for Tuesday, September 3rd, 2024:

DISNEY & DIRECTV SQUARE OFF IN CARRIAGE BATTLE. YOU SHOULD BE ROOTING FOR DIRECTV
Carriage battles between cable & satellite TV providers and the big media companies that control nearly all of the major (and minor) television networks have been going on for as long as there has been pay-TV. 

While this is an extremely simplified explanation of carriage agreements, it will do in this context. Pay TV providers - whether they are traditional cable, satellite, or the new virtual providers such as Hulu Live TV - have to reach an agreement with the owners of the networks to include them as part of their programming lineup. In the early days of pay TV, the negotiations were almost entirely about money and what number the network was on the channel dial.

But soon, things got a lot more complicated. Cable executives like John Malone built their empires by starting with a couple of channels they knew were considered "must-haves" by viewers, then rolling up lesser networks into a big, expensive channel package that pay-TV providers had to take as part of a "take it or leave it" bundle. 

That negotiating stance only grew as the various media companies began consolidating, drawing more and more networks into programming bundles that were only sold as a package. Discovery Communications bought Scripps Networks, then combined with the Warner Media networks after the merger that created Warner Bros. Discovery. The Walt Disney Company acquired 20th Century Fox, which added all of those networks to Disney's already large collection of networks.

Unfortunately for viewers - the ones who actually have to pay the bill every month - the bundle growing didn't stop there. If the media company owned a broadcast network, that had to be included as well. Along with a staggering collection of minor networks that often have primetime viewer numbers in the low thousands. Maybe. And while those smaller networks don't individually cost much per subscriber, multiplying a few cents per subscriber times 75 million adds up.

Then there are the non-programming parts of the negotiations. Each deal includes some variation of a favored nation clause, which means the cost of the channel will be the same no matter which pay TV provider is making the deal. That clause was originally framed by the big media companies as a way to ensure that larger, more powerful pay-TV providers couldn't use their negotiating strength to get a better deal than their smaller rivals. The reality has been that clause ensures the cost of programming will continue to grow. A company such as the Walt Disney Company will negotiate with a smaller pay-TV provider and bludgeon it into accepting a substantial carriage fee increase. And then in every subsequent negotiation with other pay TV providers, it uses that increase as part carrot and part stick. "We'd like to help you, but contractually, we now have to offer everyone this newly increased carriage fee. Our hands are tied!"

As streaming television came into the picture and the major media companies rolled out their own streaming services, those platforms have also become part of the negotiations. For instance, exactly one year ago Disney and Charter Communications were in a very contentious carriage dispute. And when it was over, Charter won some substantial concessions from Disney. As part of the deal, Disney+ and ESPN's future full direct-to-consumer service will be provided to Spectrum TV Select subscribers, and ESPN+ will be available to Spectrum TV Select Plus subscribers. Plus, Charter was able to drop several smaller Disney-owned networks from its lineup, including Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo. 

While we don't know the full financial details of the agreement, all of those changes will likely cost Disney somewhere in the neighborhood of $3 billion in lost revenue per year.

Now Disney is embroiled in a carriage agreement disagreement with satellite TV provider DirecTV, which has already resulted in the various Disney networks being pulled from the DirecTV programming lineup. While the exact details of the proposals haven't been made public, both sides have released statements laying out some of their concerns and DirecTV executives held a conference call this morning to explain their point of view. 

After looking at all the public statements about the negotiations and speaking with some executives on background, the one thing I can accurately state is that if you want to save some money on your pay TV bill, then you should hope that DirecTV wins this negotiation.

Granted, in any dispute, DirecTV is only going to be slightly more consumer-friendly than the big media companies. But in this case, they have very solid reasons to be unhappy.

Let's begin with the most recent issue between the two companies. Earlier this year, Disney, Fox, and Warner Bros. Discovery announced they planned to launch a stand-alone sports-centric streamer named Venu. Subscribers to Venu would have access to linear sports networks, including ESPN, ESPN2, ESPNU, SECN, ACCN, ESPNEWS, ABC, FOX, FS1, FS2, BTN, TNT, TBS, truTV, as well as ESPN+. All at a cost of $42.99 per month and while the three companies argued the subscriber base for the sports streamer would come primarily from people who were cord-cutters, several studies have already suggested the primary audience for a sports streamer are sports fans who are currently paying for an entire lineup of non-sports channels that aren't interested in.

Fubo sued the three companies and has managed to halt Venu's launch until the lawsuit is resolved. And while they have a number of issues with the idea - most of which fall under the category of monopolistic and anti-competitive behavior - the primary issue is that Venu was allowed to break the cable TV bundle to offer its sports-only channel lineup. Fubo was originally launched as a sports-centric streamer and that has always been the streamer's preferred focus. But the media companies have refused to unbundle their channels in the way they have done so for Venu. As a result, Fubo stopped carrying the Warner Media TV networks in 2020 and lost the Discovery Communications networks in 2022 after the two media companies merged into Warner Bros. Discovery.

Fubo's position is that if the three media companies unbundle their networks for their streaming service, then they are both ethically and contractually obligated to do the same for rivals such as Fubo. Fox, Disney, and WBD are strongly resisting that idea because granting Fubo that right would at best open the door to other streamers being able to launch sports-only packages. In the worst-case scenario, it would lead to the disintegration of the entire cable bundle as it now exists.

According to sources at DirecTV, Disney is insisting on several terms the pay satellite TV provider finds objectionable. Disney has reportedly offered DirecTV the ability to create a similar sports-only tier. But there are restrictions that DirecTV executives argue make the offer unworkable, including requiring minimum penetration rates for the sports programming. In other words, Disney is reportedly requiring that X number of DirecTV subscribers would have to subscribe and whatever number Disney is requiring (and that is something that wasn't shared with me), the number is high enough that DirecTV won't/can't agree to it.

Even worse from DirecTV's perspective, Disney is insisting the satellite TV provider refrain from taking a side in the current Fubo lawsuit against the company. A position that DirecTV executives are insisting to anyone who will listen that the company will never agree with.

The minimum penetration rate is an issue that affects other parts of Disney's proposal to DirecTV. Disney is offering to allow the pay satellite provider to drop some channels, but will only allow its overall channel offering to be split into genre-specific tiers if the majority of DirecTV's subscribers pick up the channels. I certainly understand Disney's reluctance to allow its kid's programming to go into a tier that the majority of subscribers won't pay for. That represents a huge financial hit for the company. But DirecTV is insisting on the ability to split Disney's networks into genre-specific tiers that its subscribers can decide to pay for (or not).

While I suspect the two companies will eventually find some ground in the middle, what is clear is that the various pay TV providers have decided that their only way forward financially is to keep pushing until they break the current cable TV bundle. Because the regular carriage fee increases not only make their legacy business too expensive for some current subscribers, but without breaking the bundle they have no way to offer so-called skinnier bundles for a reduced price. For instance, DirecTV has a streaming-only TV platform, but it has struggled to find traction because it is forced to offer the same channels at the same price as every other competitor.

The one saving grace for the big media companies is that they might be able to convince everyone to accept a modified cable bundle. Mini bundles of genre-specific networks available at the same price to everyone on a take-it-or-leave-it basis. That will mean a significant hit to their bottom line in the short term. But it would also allow the rise of other viewing options and that will ultimately keep the TV industry healthy. 

Because it's not just sports-centric streamers that will emerge from this, with a mini-unbundling, you'll see news-centric streamers launching, entertainment-centric vMVPDs such as Philo will add the entertainment networks they can't get now and there will be all sorts of options we can't imagine now. Cord cutting won't matter as much if customers have a wide range of programming options at various price points. Those options will bring more customers back into the pay-TV universe and as long as the media companies are receiving the same subscriber fee no matter what the platform might look like, they can better strategize for the future.

IT WAS FIFTY YEARS AGO THIS MONTH
Throughout the month of September, I'll be rolling out pieces that look back fifty years at the 1974-1975 primetime TV season. I have an interview with writer/producer classic TV fan Lee Goldberg coming later this week and writer Jay Faerber will take a look at the iconic detective show Harry O, which starred David Janssen. And there are many other surprises on the way.

In the meantime, check out this look at the short-lived detective series Khan!, which found its star embroiled in a controversy over whether he was Asian or just trying to "pass" as Asian. And then there was the animated Mad Magazine TV Special, which ABC ordered and then never aired. Plus, a fun bit of Rockford Files trivia.

Have a favorite show from that season or have some thoughts you'd like to contribute? Email me at rick@allyourscreens.com

FROM THE WEEKEND
* So what are some of most popular stories on the Penske Media trade outlet websites? You Might Be Surprised

* Action Saturday Nights: five lesser-known action films worth streaming

WHAT'S NEW TONIGHT AND TOMORROW

TUESDAY, SEPTEMBER 3RD:
* After Midnight Season Two Premiere (CBS)
* Chopped: Legends: Scott Conant (Food)
* Dark Side Of Reality TV Series Premiere (Vice)
* Last One Standing Season Three Premiere (Netflix)
* Phil Wang: Wang In There Baby! (Netflix)
* Untold: Hope Solo vs. U.S. Soccer (Netflix)

WEDNESDAY, SEPTEMBER 4TH:
* Bargain Block Season Premiere (HGTV)
* BrickToons (Disney+)
* Des (BritBox)
* Guy's Grocery Games: All Star Rumble (Food)
* How (Not) To Get Rid Of A Body Series Premiere (Investigation Discovery)
* Icons Unearthed: Tom Cruise (Vice)
* Murai In Love Series Premiere (Hulu)
* Outlast Season Two Premiere (Netflix)
* Slow Horses Season Four Premiere (Apple TV+) 
* Tell Me Lies Season Two Premiere (Hulu) 
* Unsellable Houses Season Premiere (HGTV)
* Wild West Chronicles Season Four Premiere (INSP)

SEE YOU ON WEDNESDAY!