A routine negotiation over rates between satellite TV provider DirecTV and Walt Disney Co. has escalated into a high-stakes battle over the future of television bundling.
The dispute has led to 11 million DirecTV customers losing access to popular Disney-owned channels, including ESPN. It comes at a pivotal moment for the television industry as consumers shift toward streaming services.
DirecTV’s customers found themselves without access to ESPN during the U.S. Open tennis tournament.
The conflict arises as major media companies—Disney, Fox, and Warner Bros Discovery—are preparing to launch Venu Sports. The channel is a new sports streaming service that could reshape the television landscape by further accelerating the migration of live sports from traditional TV to streaming platforms.
The Future of Bundled Programming
DirecTV’s Push for “Skinnier” Bundles
At the heart of the dispute is DirecTV’s demand for flexibility in how it offers TV programming. The satellite TV provider has been pushing Disney to allow it to sell smaller, lower-priced packages—known as “skinnier” bundle. These exclude channels like ESPN for customers who do not watch sports.
DirecTV argues that offering more customized packages is crucial for meeting consumer demand in the streaming era.
DirecTV Chief Financial Officer Ray Carpenter said:
“This is not a run-of-the-mill dispute;.
“This is really about changing the model in a way that gives everyone confidence that the industry can survive.”
However, Disney has pushed back against these proposals.
In a joint statement, Disney Entertainment co-chairmen Dana Walden and Alan Bergman, along with ESPN chairman Jimmy Pitaro, said:
“DirecTV continues to misrepresent the facts around our ongoing negotiations. Our priority is to reach a marketplace deal that serves the needs of DirecTV and their customers while also recognizing the value of our top-quality content.”
Bundling vs. Streaming
The longstanding practice of bundling has helped prop up the traditional pay-TV industry for decades.
Pay-TV distributors like DirecTV have historically been required to carry a broad range of Disney-owned channels. Thse include lesser-viewed networks like Freeform, to access premium content like ESPN.
As the cost of television packages has soared, these disputes have become more common. However, the shift to streaming has added new complexities to the equation.
Streaming services like Netflix and Disney+ have increasingly attracted viewers away from traditional cable and satellite TV. Sports—a key component of live television—has followed suit.
The migration of major sporting events, like the Olympics, NFL games, and NBA contests, to streaming platforms, has further weakened the grip of traditional pay-TV providers.
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The Impact of Venu Sports
Potential Death Blow to Pay TV
Originally scheduled to debut in August, the launch of Venu was temporarily blocked by a court injunction. This came after sports streaming competitor FuboTV filed a lawsuit accusing the media companies of anti-competitive behavior.
Experts warn the success of Venu could further accelerate the decline of pay-TV.
Craig Moffett, an analyst at MoffettNathanson, said:
“A successful launch of Venu could have spelled the death blow to the traditional linear pay TV bundle.”
Court documents revealed Venu’s media partners believe the service could siphon as much as two-thirds of its customers from cable and satellite TV, posing a direct threat to companies like DirecTV.
DirecTV’s Long-Term Strategy
Seeking Sustainability in the Streaming Era
As DirecTV navigates this challenging landscape, its leadership is focused on securing a deal that ensures the long-term sustainability of its business.
Unlike some of its competitors, DirecTV is solely in the business of delivering video to customers’ homes, and the company believes that offering more flexible, customized programming packages is essential for staying relevant in a market dominated by streaming services.
Carpenter added: “We need something that is going to work for the long-term sustainability of our video customers. “So, the resolve is there.”
DirecTV’s push for a new model is not without precedent.
Last year, the nation’s largest pay-TV company, Charter Communications, won concessions from Disney in a similar dispute. This allowed it to offer a skinnier programming package and rights to distribute Disney+, Hulu, and ESPN+ to its Spectrum TV customers.
DirecTV is hoping to secure similar flexibility as part of its negotiations.
The Way Ahead
The battle between Disney and DirecTV highlights the growing tension between traditional television providers and the rapidly expanding world of streaming.
As more consumers opt for streaming services over bundled TV packages, companies like DirecTV face the challenge of adapting to the new media landscape.
With the launch of Venu Sports on the horizon and ongoing disputes over programming packages, the future of TV bundling is at a critical juncture.
