Disney dispute leaves DirecTV customers without popular sports channels

More than 11 million DirecTV customers were left in the dark after Disney pulled ESPN, ABC and other channels from the provider on a busy sports night. Viewers were cut off in the middle of a U.S. Open tennis match and before the kickoff of a college football game. The dispute centers around what channels DirectTV must carry. Geoff Bennett discussed more with Meg James of The Los Angeles Times.

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Geoff Bennett: More than 11 million DirecTV customers were left in the dark after Disney Entertainment pulled ESPN, ABC, and other channels from the satellite provider on a busy sports night.

Viewers were cut off in the middle of a U.S. Open tennis match and before the kickoff of a college football game. The dispute centers around what channels DirecTV must carry and whether that makes sense in a changing landscape of cord-cutting. It comes as the NFL season starts tonight.

For more on this and what it says about the business in the age of streaming, I’m joined by Meg James, who covers the entertainment industry for The Los Angeles Times.

Thanks for being with us.

Meg James, The Los Angeles Times: Thank you for having me.

Geoff Bennett: This all started as a routine dispute over the rates DirecTV would pay Disney Entertainment for its television networks.

How did both sides hit this impasse?

Meg James: Well, this debate has been simmering behind the surface because the pay-TV providers, like DirecTV are increasingly aggravated that Disney and other programmers have started their own streaming services basically to go into competition with their longtime partners.

And this dispute has been sort of going on for a few weeks, but it really roared into public focus on Sunday, when the deadline for the last deal expired and DirecTV no longer had authorization to carry Disney’s channels, including ESPN.

There are a lot of, like, very what would seem like arcane rules that the programmers have instituted, which used to work out fine for the pay-TV providers and the programmers. But in an age of skinnier bundles, these rules are just not working for the likes of DirecTV.

Geoff Bennett: So what’s Disney’s position in this? Why are they so opposed to what DirecTV wants?

Meg James: Well, it comes down to money really.

What happens is, these programmers like Disney, they require DirecTV to carry their channels in about 80-85 percent of all of DirecTV homes. And what DirecTV wants to do is say, wait, only about 40-50 percent of our subscribers are watching ESPN. ESPN is the most expensive cable channel out there.

So what DirecTV is trying to do is tailor some more smaller packages, like children’s entertainment, family entertainment, sports programming. And they say that Disney’s refusal to relax these minimum penetration rates is making that goal of DirecTV’s to offer packages that they feel their customers want virtually impossible.

Geoff Bennett: So, at the heart of this, as you mentioned, is the domination of streaming. How does the streaming business really threaten both companies’ business models?

Meg James: Well, Disney has made billions of dollars over the years by the cable TV programming fees that they get from DirecTV, Charter, and other providers. They do not want to see that money go away.

At the same time, they recognize that users, television users, younger viewers are increasingly turning to streaming services. And so they want to be in both places. But that’s where the pull is.

DirecTV is not in the streaming — they have a DirecTV stream, but they’re not programming their own shows, a la Netflix or Peacock, and they really want to hold onto the customers that they have. But that’s increasingly difficult when their packages cost $100, and you can get a streaming service for far less than that.

Geoff Bennett: There was some thought that the start of the NFL season would force these companies’ hands. Is that still the case?

Meg James: Yes. I mean, a lot of people are sort of watching for next Monday — it’s the first Monday Night Football game on ESPN — to see if that’s really going to be where the flash point or the breakthrough comes, the logjam breaks.

Last year, we covered a similar deal, when Disney’s channels were off of a competing pay TV provider, and it was the Monday Night Football deal that led to the breakthrough.

Geoff Bennett: So what might this mean for the industry overall?

Meg James: Well, I think what this really shows is the strain in these traditional big, huge, fat cable TV bundles.

People typically don’t watch hundreds of channels. They watch 17 to 30 channels. And that’s what DirecTV is trying to do. They’re trying to make it so that they can provide their customers and new customers with these smaller packages that people want to watch.

At the same time, it’s really — I think, in a weird way, while DirecTV is trying to maintain their customer base, they are also sort of forcing some of their subscribers to look at streaming packages that they might say, hey, they might never have looked at before. So it’s a really tight rope that these two companies are walking and it shows just the strain of these legacy businesses.

Geoff Bennett: Meg James of The Los Angeles Times, thanks for being with us.

Meg James: Thank you.