DirecTV CFO Ray Carpenter says the pay-TV bundle should have between 10 and 50 of the “most engaging” channels, a fraction of the “hundreds” of offerings crammed into “bloated,” high-priced packages.
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Smaller bundles would be “much more reflective of what customers watch,” he said Tuesday during a conference call with Wall Street analysts.
The comments, accompanied by a presentation deck, came on the third day of a major blackout of 16 Disney networks including ABC and ESPN for DirecTV’s 11 million-plus subscribers. The dispute, playing out at the start of the college football and NFL seasons, has caught the interest of the entire media industry as well as Wall Street given steep rates of cord-cutting and uncertainty about where the pay-TV bundle will ultimately settle. After topping 100 million barely a decade ago, the total number of U.S. pay-TV households has shrunk to a bit more than 70 million.
At the center of the conflict is the concept of slimmer packages of channels, something that price-sensitive consumers and cord-cutting-hit programmers and distributors all seem to support. DirecTV claims Disney rejected its efforts to put forward a number of smaller packages, including a sports-focused one; Disney has pushed back strongly on that assertion, claiming that DirecTV “failed to engage” on several such proposals despite its “spin” to the contrary.
Carpenter’s remarks and the presentation deck focused on a “brighter” future for pay-TV. In the current setup, he said, consumers “are asked to manage this increasingly complex set of subscriptions and applications.” The result is higher rates of churn. As it has assessed its options even before the Disney standoff, the exec added, DirecTV has gravitated toward the idea of trading off potentially lower profit margins with lower rates of churn given the long-term potential.
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Asked by an analyst why it shouldn’t be expected that DirecTV, as Charter did in a battle with Disney exactly one year ago, won’t just capitulate once Monday Night Football and the NFL return next week, Carpenter said the fight is an “existential” one for DirecTV. “This is not just a run-of-the-mill dispute for us,” he replied. “We didn’t go into this thinking, ‘Hey, let’s see how much of this we can leverage before Monday Night Football rolls around and then make a deal,'” he said. “We’re prepared to take this as long as it needs to.”
Disney is a stakeholder with Fox and Warner Bros. Discovery in a pay-TV joint venture, Venu Sports, whose launch was recently blocked by a New York federal judge on antitrust grounds. MoffettNathanson’s Craig Moffett, a respected analyst who has tracked the cable industry for decades, sees the combination of the Venu legal defeat and the DirecTV-Disney clash as a “potentially apocalyptic” for the traditional TV business.
“It is not an overstatement to say that bundling is everything for the pay-TV industry,” Moffett wrote in a note to clients Tuesday. “Without it, what’s left of linear TV (or, at least, its economics) would rapidly unravel, replaced by a punishing a la carte model that, even at stratospheric prices for the ‘must have’ networks wouldn’t come close to replacing the lost revenues of the current model.”
Asked during the call about the Venu ruling, Carpenter said he was “not surprised” by it. Even if the service doesn’t end up launching, he said, the plans for it and the antitrust suit filed by Fubo to block it “helps bring to a larger audience the understanding of what’s broken” in the pay-TV system.
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