Disney has finally reached a new carriage deal with Charter Spectrum. The deal is unusual in that Disney is allowing them to carry only some channels they offer instead of the entire package, and the ones that they are not keeping pay heavily into Disney+, which will be given to Spectrum Select TV customers with their package in the future. ESPN+ will also be added to a new Spectrum sports-focused tier offered by the carrier.
Spectrum “won” in regards to not having to carry all of Disney’s channels to keep their costs down, going from 27 Disney channels to 19. However, Disney is having their “cake and eating it too” as Charter Spectrum will now pay a “wholesale price” to Disney to carry Disney+. All of this was likely a better deal for the cable company than carrying all the Disney-owned channels.
Ultimately, Disney wins, and here’s how.
Disney will still be paid for the channels Charter Spectrum keeps, as well as being paid for Disney+. This comes at a time when Disney is losing subscribers and has resorted to $1.99 a month for three months deal to try to encourage new and returning subscribers.
In this deal with Spectrum, Disney will gain access to 9.5 million more customers. While some already had Disney+, they will still likely gain millions of new subscribers that don’t. Disney can then leverage the new subscribers for investor support, optics, and advertising dollars.
This deal includes Disney+ with ads being given to all Spectrum Select TV customers so Disney can market their advertising opportunities to potential clients with 9.5 million more ad-supported subscribers. Even if they gave Spectrum a “wholesale price,” they will get paid via the cable company once for the wholesale rate and then again from all the commercials they will sell.
Dana Walden, co-chairman of Disney Entertainment even indicated this was the plan in this comment to The Hollywood Reporter saying:
“We need to keep growing our streaming business, that is a focal point of our strategy right now. And this deal gives us the ability to have Disney+ basic distributed to Charter’s nine and a half million Select subscribers, which is great for us and enables us to grow subscribers, revenue, our advertising business, and it also lets us maintain our primary channels on the linear entertainment side, which are important to driving revenue.”
ESPN will still bring revenue potential for Disney
ESPN+ will also be added a new sports package. Disney will seemingly not be paid extra for this, by Disney allowing ESPN+ to be added to some packages Disney can create a bump in the subscriber numbers making it more appealing to more advertisers. According to the AP this is also what ESPN president Jimmy Pitaro thinks.
“While making a direct-to-consumer product available through a cable system may seem counterintuitive, the deal will help the soon-to-be launched ESPN service get established and have more access to advertisers, Pitaro said.”
So even if people aren’t paying for ESPN directly, customers being given the service with their package still holds advertising value to Disney. Give it away to increase subscribers and then leverage those subscribers for advertising money.
Disney gave up forcing a few channels onto Spectrum, most of which are reflected on Disney+ (DisneyXD, Disney Jr, Nat Geo etc.,) but they stand to gain much more. If Disney makes the gains that Walden lays out, this new carriage agreement could be implemented with other carriers too. Disney gains subscribers and revenue, driving advertising dollars with each large subscriber influx.
One possible downside is that part of the reason investors are suing the Walt Disney Company over Disney+ is that Disney has prioritized bundles and discounts for subscribers as well as “free” Disney+ offers with other companies at wholesale rates, which investors claim drive down revenue per user. The difference between then and now is that Disney is currently selling advertising to offset the loss per subscriber. They are effectively getting paid twice, once as a subscription payment and again with advertising sales for commercials on the platform. Hence “driving revenue.”
Charter Spectrum got to limit what they paid for and go the sports back to their customers, while Disney will get millions of new Disney+ subscribers / ESPN+ subscribers and money from the cable network for the channels they kept.
I think Disney came out ahead in this deal, but it seems that everyone is getting something they want. Spectrum subscribers get more too.
That is how it seems to me at least.
Sources: The Hollywood Reporter, AP
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