Walt Disney Co. shut down ESPN and other DirecTV channels on Sunday, minutes before kickoff of a high-profile USC football game and in the course of the U.S. Open tennis tournament – to the anger of sports fans who were within the midst of a bitter contract dispute.
More than 10 million DirecTV and U-Verse video customers were drawn into the dispute when DirecTV lost the rights to broadcast Disney programming, including Disney-owned ABC television stations.
The two corporations had been negotiating for weeks at DirecTV headquarters, but were unable to agree on a brand new licensing agreement by the September 1 deadline.
The ban is the newest sign of the strain on traditional TV broadcasters as their customers switch to streaming.
“Consumers will blame someone, but really both companies had to put themselves in this situation,” Ross Benes, senior analyst at Emarketer, said recently.
Here’s what it is best to know in regards to the dispute:
Why does this occur?
Pay-TV providers like DirecTV have seen dramatic increases in the price of licensing programming as their customer bases have shrunk resulting from cable cancellations. TV providers are struggling to make cash from their video channels and fear that big price increases will only drive away more customers.
The cost of carrying television networks (ABC, CBS, Fox and NBC) and sports channels corresponding to ESPN has skyrocketed as broadcasters seek to pass on the value increases they’ve promised to sports leagues and conferences. These price increases must increasingly be borne by the shrinking variety of traditional pay-TV subscribers.
DirecTV asked Disney for flexibility to supply smaller, genre-specific packages. Disney has long required pay-TV corporations to hold its cable channels, including ESPN, within the homes of most of its customers. ESPN is the costliest basic cable channel, costing providers nearly $10 per thirty days per subscriber household.
This has led to one of the crucial sensitive points in the present dispute: Disney's “minimum penetration” requirements for its channels, including ESPN. Disney requires that ESPN be broadcast to about 82 percent of DirecTV subscribers.
Minimum penetration has allowed Disney to gather huge fees over time, even from subscribers who don't watch much sports. Pay-TV corporations need to pay penalties in the event that they don't meet the minimum threshold.
DirecTV argues that it’s unfair to burden these subscribers with the high cost of sports programming, since lower than 40% of its customers repeatedly watch Disney sports content. Disney counters that the corporate has invested heavily in high-quality programming and has offered its channels, including ESPN, to DirecTV at market prices.
DirecTV is attempting to lower these penetration rates and reduce the fees it has to pay if it doesn't meet the edge.
The satellite provider also points out that only 10% of its customers repeatedly watch children's programs, but greater than 80% of its subscribers pay for these channels.
In addition, DirecTV and other distributors have also chafed at efforts by Disney and other entertainment giants to construct their very own streaming services that compete with their longtime partners, the pay-TV corporations. Disney, Warner Bros. Discovery and Fox Corp. teamed up this 12 months to construct a sports streaming service called Venu as a substitute for corporations like DirecTV. The effort was challenged in court, and a federal judge in New York issued a short lived restraining order temporarily blocking Venu from launching.
How long will this dispute last?
That is unclear.
A 12 months ago an analogous dispute between Disney and Charter Communicationswhich operates the Spectrum service, lasted 12 days.
Following that bitter battle, Charter dropped some smaller Disney-owned channels, including Freeform, and won the precise to supply Disney streaming services, including Disney+, as a part of its package. But the outage proved costly for Charter, which lost more subscribers than expected.
The suspension ended just as ESPN's first Monday Night Football game of the season began.
Usually a dispute ends when either side feel the economic consequences.
“There is always a lot at stake,” said Benes. “But if [DirecTV doesn’t] If there are not any more ESPN channels in the subsequent three months, that can result in much more cable TV cancellations. That could possibly be one other nail within the coffin.”
Which programs could be affected?
Customers living in cities where a Disney-owned ABC television station, such as KABC-TV Channel 7 in Los Angeles, can be expected to experience interruptions to some of their favorite shows, including “Good Morning America,” “Jeopardy” and local newscasts. Disney owns eight ABC stations, including those in San Francisco, Fresno, New York, Chicago, Houston, Philadelphia and Raleigh-Durham.
Right now, the biggest pain is being felt by sports fans. College football fans are still upset about missing Sunday's clash between USC and Louisiana State University, in which the 23rd-ranked Trojans achieve an exciting last-minute victory over the Tigers in 13th place.
ESPN owns the rights to the US Open tennis tournament, which is in the final rounds of men's and women's quarterfinals and semifinals, with the finals taking place this weekend.
College football also plays a big role on ABC and ESPN.
Monday Night Football on ESPN and ABC kicks off with a high-profile matchup between the New York Jets and San Francisco 49ers, two markets served by ABC-owned networks. The game is expected to feature the return of Jets quarterback Aaron Rodgers, who suffered a season-ending injury in last year's MNF opener.
ABC will also host the first presidential debate between Vice President Kamala Harris and former President Trump on September 10. However, the debate will also be broadcast by other networks.
The Disney-owned channel will also broadcast the 76th Primetime Emmy Awards show on September 15, meaning millions of customers will not be able to watch the TV fan fest – hosted by father-son comedy duo Eugene and Dan Levy — if the dispute lasts for more than two weeks.
Is there a workaround?
Viewers can receive ABC signals via a digital Over-the-air antennaBut that won't help viewers of Disney cable channels ESPN, ESPN2, Disney Channel, FX or National Geographic.
Competing services offering Disney's cable channels include YouTube TV, Sling TV, Hulu + Live TV (owned by Disney), FuboTV, and traditional cable and satellite providers including Charter Spectrum, Cox Communications, Comcast and Dish Networks.
Can I get a refund?
Yes, sort of. DirecTV is offering its customers a $20 credit as compensation for the outage. must apply for the loan to an upcoming bill.
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