Is Disney Too Big?
Yet another service disruption over rights fees calls attention to the issue.
AP (“ESPN networks, ABC and Disney channels go dark on DirecTV on a busy night for sports“):
ESPN has gone off the air on a major carrier for the second straight year during the U.S. Open tennis tournament and in the midst of the first full weekend of college football.
Disney Entertainment channels went dark on DirecTV Sunday night after the sides were unable to reach a new carriage agreement.
The move angered some sports fans, who posted their displeasure on social media. And the U.S. Tennis Association wasn’t pleased with another carriage dispute.
ESPN was showing the fourth round of the U.S. Open when it went off the air on DirecTV at 7:20 p.m. EDT.
That was a half-hour before the start of the match between Frances Tiafoe, an American who reached the 2022 U.S. Open semifinals, and Alexei Popyrin, an Australian who eliminated defending champion Novak Djokovic on Friday.
“It is disappointing that fans and viewers around the country will not have the opportunity to watch the greatest athletes in our sport take part in the 2024 U.S. Open due to an unresolved negotiation between DirecTV and Disney, resulting in the loss of access to ESPN. We are hopeful that this dispute can be resolved as quickly as possible,” the USTA said in a statement.
It also happened 10 minutes before the start of the college football game between No. 13 LSU and 23rd-ranked Southern California in Las Vegas.
ABC-owned stations in Los Angeles; the San Francisco Bay Area; Fresno, California; New York; Chicago; Philadelphia; Houston; and Raleigh, North Carolina, also went off DirecTV.
This phenomenon isn’t new, of course. There are a plethora of cable and satellite providers, as well as streaming services, who bundle content and sell them to consumers. Disputes over carriage fees are routine and outages like this happen from time to time.
Last year, Disney and Spectrum — the nation’s second-largest cable TV provider — were involved in a nearly 12-day impasse until coming to an agreement hours before the first Monday night NFL game of the season.
I was a DirecTV customer for 17 years but cut the proverbial cord when we moved to our new house just over five years ago. While we get our Internet service through Cox, we get our live TV through Google-owned YouTube TV. Before that we got it through Disney-owned Hulu, switching because I wanted NFL Sunday Ticket, previously available only through DirecTV but only through YouTubeTV as of last season.
Regardless, this caught my attention:
DirecTV said Disney offered an extension to keep the channels on the air in exchange for DirecTV having to waive all future legal claims that its behavior is anti-competitive.
Which seems downright anti-competitive to me.
“The Walt Disney Co. is once again refusing any accountability to consumers, distribution partners, and now the American judicial system,” said Rob Thun, DirecTV’s chief content officer, in a statement. “Disney is in the business of creating alternate realities, but this is the real world where we believe you earn your way and must answer for your own actions. They want to continue to chase maximum profits and dominant control at the expense of consumers — making it harder for them to select the shows and sports they want at a reasonable price.”
DirecTV has 11.3 million subscribers, according to Leichtman Research Group, making it the nation’s third-largest pay TV provider.
Dana Walden and Alan Bergman, co-chairmen of Disney Entertainment, and ESPN chairman Jimmy Pitaro issued a joint statement urging DirecTV to finalize a deal.
The statement added that “while we’re open to offering DirecTV flexibility and terms which we’ve extended to other distributors, we will not enter into an agreement that undervalues our portfolio of television channels and programs. We invest significantly to deliver the No. 1 brands in entertainment, news and sports because that’s what our viewers expect and deserve.”
The impasse comes as networks and distributors continue to be at odds over content. Distributors and subscribers would like to see a model where they can buy channels a la carte instead of subscribing to a bundling package.
Distributors are also frustrated with production companies putting some of their premium programing on direct-to-consumer platforms before they show up on channels. DirecTV cited the miniseries “Shogun” appearing on Hulu before FX.
“Consumer frustration is at an all-time high as Disney shifts its best producers, most innovative shows, top teams, conferences, and entire leagues to their direct-to-consumer services while making customers pay more than once for the same programming on multiple Disney platforms,” Thun said. “Disney’s only magic is forcing prices to go up while simultaneously making its content disappear.”
Besides all ESPN network channels and ABC-owned stations, Disney-branded channels Freeform, FX and National Geographic channel went dark on DirecTV.
On the one hand, DirecTV is a content distributor and Disney is a content provider. To the extent DirecTV wants to distribute Disney content, it needs to meet Disney’s asking price. To the extent Disney cuts DirecTV a break, it drives its own price down for other distributors.
On the other hand, several Disney properties, notably ABC and the ESPN family of networks, are essentially must-carry. Live sports is the main reason many of us subscribe to these packages to begin with, so DirecTV really has no choice. Without that content, they’re just not competitive.
But neither ABC nor ESPN are organic to Disney. They’re properties the company bought up as their empire grew. It’s arguable, at least, that they’ve reached oligopoly status precisely because of their must-carrry status.
Then again, it’s arguable that the NFL has achieved similar status organically. It’s far and away the most popular television product and seems only to be growing in stature. That Sunday Ticket’s exclusivity essentially forced me to change where I get my television programming is an amazing amount of power.
Call me crazy but I continually come down on the side of content creators. I’m anti-piracy and think the major lawsuit the NFL is facing is nonsense.
If you want what Disney or the NFL or the guy down the streets is making, pay them what they want. If you’re not willing to pay for it, don’t enjoy it.
Now, if these companies have unique legal protections or whatever, get rid of those.
@Kazzy: I think the NFL and Disney are distinct cases. The NFL has a monopoly on, well, the NFL—a business they built from scratch over the course of a century or so. (There were mergers with some rival leagues, the most recent of which took place almost 50 years ago, which complicates matters somewhat.) It has enormous market power but it’s organic.
Disney, on the other hand, is a massive corporation that bought up lots of smaller ones—ABC, ESPN, Hulu, etc.—over time. It’s both selling to content distributors and competing with them by offering their own streaing services. It’s a more obvious anti-trust situation.
I wonder if this is a legal case whose time has passed. In the cord cutting era, power lies with the NFLs of the world. ESPN is in existential decline but for its ability to bid highest on a limited commodity. Any anticompetitive behavior on Disney’s part can be justified by pointing to Amazon and other competitors. Yes, they are not direct competitors in the cable bundle business, but the commodity no longer needs that particular distribution model. Interesting times we live in.
Disney seems to be regaining its footing. They’ve had some big hits, albeit mostly from the Fox assets they acquired. They’ve effectively destroyed Star Wars, and Marvel is limping, but Pixar seems to be coming back strong. They are kinda, sorta in the black on streaming.
WBD (Warner Discovery) is in much worse shape. As in, someone should step in and take the keys to the executive washroom away from Zaslav. This twat has set billions of dollars on fire and then demands a 50 million dollar comp package.
These carriage battles are like a blast from the past. Disney and others still in the linear TV business are like the people on the Titanic who keep crawling toward the bow to hold on for another minute.
I’m tempted to cite the Golan Trevize Principle: It’s not food and drink. It may be uncomfortable to do without certain entertainment content, but it’s not going to kill you.
First World problem. More specifically a First World upper-middle/lower extremely affluent problem. So sad. :*-(
To answer the headline question: Yes. Yes, it is.
@James Joyner: But in that case Disney is offering multiple avenues to consume their product: you can pay a cable provider to watch ESPN on your TV or you can pay ESPN for streaming access or both. And if you don’t want ESPN, do none of those. And if you want some channels but not ESPN and your provider bundles… well, dems da costs. How is that Disney’s fault?
Hugely scaled up version of much smaller Waystar Royco.
I have always thought Disney a closer fit than Murdoch.
@charontwo:
Disney’s not a captive company. They have millions of stockholders – as Nelson Peltz discovered recently. Fox News/Murdoch/Roystar are effectively controlled by a single person or single family. Bob Iger could never get away with what Logan Roy or Murdoch got away with. Or have as much fun. Or have such great dialog.
@Steven L. Taylor:
Small disagreement. Disney has to compete with not just the usual suspects, they have to compete with Apple 3.5 trillion market cap and Amazon 1.8 trillion. Disney’s worth 160 billion, with a lousy, ‘b.’ Apple is worth ~ 22,000 times as much. All of Hollywood together is a rounding error to the big boys.
@Steven L. Taylor: Out of curiosity, how so for “yes, Disney is too big?” And what do the people who are concerned about/affected by it’s too bigness do to change the situation?
@Michael Reynolds:
I was not looking at the capital structure or type of ownership or management.
I was just looking at what the actual business is: cruise lines, theme parks that are Disneyland knockoffs, movie studios, TV channels etc.
Obviously Disney is way too big to be threatened by hostile takeover attempts the way Waystar Royco was.