Charter Communications Might Exit Traditional Cable Business if Carriage Dispute with Disney Isn’t Resolved Quickly
Spectrum cable customers who woke up to watch “SportsCenter” hoping to catch highlights of last night’s college football action were likely disappointed to see that ESPN was blacked out this morning. A dispute over carriage fees has caused 19 Disney-owned cable channels, as well as retransmission fees for seven ABC owned-and-operated stations across the country to go dark for Spectrum users.
Predictably, both sides are heaping blame on the other for the disagreement. But according to company executive, Spectrum may find itself backed into a corner by the dispute. Charter Communications, which operates the Spectrum cable service, held a conference call with Wall Street investors on Friday to discuss the situation with Disney.
During that call, Charter CEO Chris Winfrey said that the company offered a “hybrid” distribution model to Disney for its channels going forward, one that incorporated both linear TV and streaming. Disney rejected that new plan, and the longer its channels are blacked out on Spectrum, the more likely that Spectrum loses customers who will seek those channels elsewhere.
“Our likelihood of being willing to do a deal decreases over time as those downgrades to video occur,” Winfrey said. “And our likelihood of heading into a ‘moving on’ scenario with a completely different video product structure goes up significantly.”
It’s possible the structure to which Winfrey is referring is the new Xumo platform the company is currently building as a joint venture with Comcast. The new Xumo will incorporate live TV streaming powered by Spectrum, as well as on-demand video as provided by NBCUniversal’s streamer Peacock, as well as house numerous free ad-supported TV channels. Winfrey said in late July that the platform would be the company's “go-to” method of signing up customers for pay-TV subscriptions going forward.
Either way, Winfrey’s comments provide a stark picture of the current state of cable. He estimated that cable subscriptions had dropped by 25% in the past five years, and his own company has only around 15 million pay-TV customers left. ESPN is one of the channels no longer available to Spectrum customers thanks to the dispute, and with the start of football season essentially here, Spectrum could indeed see a mass exodus of users to other services that do still offer Disney-owned channels.
Indeed, Disney knows full well just how bad the situation on cable has gotten. CEO Bob Iger expressed a willingness to sell off Disney's linear channels this summer to focus Disney’s entertainment efforts on its movie studio and streaming, and is also looking to partner with tech companies to help it create a streaming platform to house ESPN channels without the need for a cable subscription.
That’s probably the reason Disney demanded higher retransmission fees from Spectrum in the first place. If it can’t keep its cable channels afloat in the long term, it has to wring as much money from them as it can in the short term. But those tactics might force Spectrum out of the traditional cable business altogether, compelling the company to pivot to a streaming-forward solution for offering customers cable channels in the future that might heavily incorporate Xumo.
Xumo Play
Xumo Play is a free video streaming service that includes on-demand access to several movies and TV shows. Xumo Play offers 290 free virtual channels, including those focused on reality TV, vintage TV, and game shows.