Disney vs Charter: will cable operators drop Pay TV?

"The Walt Disney Company, the owner of this channel, has removed their programming from Spectrum which creates hardship for our customers." Late August 2023, Charter’s 14.1M Pay TV subscribers could see this message appearing on their TV screens. One of the biggest operators missing channels from Disney, an entertainment mastodon, is a sign that the dispute has reached an unprecedented level. Especially during the broadcasting of the Tennis US Open. Although both companies shook hands on a new distribution deal in mid-September, let’s analyze the context and the nature of the agreement. We’ll ultimately address the point of which player got the most out of the deal, and how other historic Pay TV actors adapt to this evolving landscape. Charter prioritizes Internet & Mobile over Video Looking at Charter’s revenue mix, the Connecticut-based company increased its Internet revenue by almost 40% between Q219 and Q223. Mobile service revenues skyrocketed from 158M to 539M. Both services can be combined via the Spectrum One Bundle, for $49.99. These positive figures seem to offset the growing loss of video revenues. Indeed, between Q219 - Q223, Charter’s video revenues weakened by almost 5%. This loss is without a doubt due to cord-cutting, which is the ultimate step of a self-perpetuating circle. Indeed, actors such as Disney recently moved their best content from Pay TV to put it on their own new streaming services. Less premium content available on linear leads to subscribers churning, as consumers rather subscribe to a streaming service. The result is that the remaining Pay TV subscribers have to pay more each month, because of the increasing affiliate fees asked by companies such as Disney to offset increasing sports rights. Those price spikes make more subscribers leave Charter, which keeps the cord-cutting circle going. Charter’s rival, Comcast, also focuses on connectivity As far as Comcast is concerned, “Connectivity is also King”: broadband operations seem far more promising with the upcoming rollout of Docsis 4.0 and expansion projects, especially in the context of BEAD allocations - a $42.5B Broadband, Equity & Access Development Fund aimed at connecting all Americans to high-speed Internet before 2030. Regarding Pay TV, Comcast recorded its worst quarter ever in terms of Pay TV subscriber losses in Q2 2023 (more than 7% QoQ). The ever-diminishing weight of Pay TV urged Comcast to partner with its rival Charter to operate Xumo, a FAST service, in late 2022. Comcast already owns several OTT assets: as well as a third of Hulu, alongside… Disney. To compensate for its declining linear video business, Comcast also took measures to push consumers towards Peacock’s Premium tier: the Peacock free option won’t be available for new consumers, while the Premium tier won't be included free...