ESPN blackout frustrates millions of sports fans over the weekend
The GIST: Charter and Disney are headed for divorce. The telecoms company — which operates under Spectrum’s umbrella — removed Disney and ESPN programming last Thursday due to an ongoing carriage dispute. The abrupt move resulted in an ESPN blackout that frustrated millions of sports fans over the weekend. Yikes.
The details: The dispute is a result of the current pay structure between Disney, Charter, and consumers. Disney gradually increased its distributor fee, which Charter passed onto customers, resulting in rising costs and increased cancellations. Charter pays Disney more than $2.2B a year for access to its channels (e.g. ESPN), but was fighting for more flexibility for its cable packages and the ability to offer streaming services like Disney+ to consumers.
- The sides were unable to reach a new deal, so Charter lost access to ESPN channels last Thursday, meaning no Alcaraz-Harris US Open match or Utah vs. Florida college football game for Charter customers.
- As negotiations continue between the two companies, subscribers currently can't watch the US Open, college football, or ESPN's upcoming Monday Night Football broadcast. Dun dun dun duuun.
The context: The cutoff may seem abrupt, but Charter-Disney relations have been contentious since 2019, when they worked out their current deal. However, the landscape has changed since then, namely with increased streaming competition.
- It's becoming more profitable for Charter to focus on its wireless and broadband services rather than cater to Disney's rising fees. Executives also suggested that Charter may leave the cable game altogether, a move that would have a profound ripple effect across the sports broadcasting landscape.
Zooming out: Charter may not need ESPN, but sports fans still do. It's the top cable network in primetime, although its grasp on U.S. households has declined in recent years. ESPN is seeing more competition than ever from streaming platforms, yet major cable networks are still the driving force of the sports broadcast industry.
- Since ESPN makes its money from carriage fees more than ad revenue, a drop in subscribers — or losing negotiating leverage to cable companies — is a BFD for a company seeing dramatic layoffs this year. If ESPN wants to battle it out in the streaming wars, they'll have to come correct and get that cable money first.