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As Labor Day approaches, ESPN and parent company Walt Disney Co. are once again locked in an unresolved and potentially problematic distribution issue coloring the sports-filled holiday weekend.
A year after the sports media giant battled with Charter, the No. 1 cable carrier in the U.S., in a standoff lasting nearly two weeks, ESPN is now in a similar situation with DirecTV, the No. 3 distributor. The current deal between DirecTV and Disney expires Sunday, and, while negotiations are ongoing, there is no new agreement and a structural divide remains between the two sides.
“We don’t have a deal. There are still fairly large gaps in the perspectives we’re each bringing to the table,” Justin Connolly, Disney president of platform distribution, tells Front Office Sports. “DirecTV needs to roll up their sleeves and engage on things that we can execute together.”
DirecTV holds more than 11 million subscribers, and it is pushing to alter its Disney deal to allow for smaller, more tailored bundles. If the deal is not renewed, access to top-tier events such as the US Open in tennis stand immediately at risk for those consumers, soon followed by ESPN’s coverage of college football and the NFL’s first Monday Night Football game of the season, set for Sept. 9 between the Jets and 49ers.
Disney has offered various options similar to its Charter deal from a year ago, Connolly says. That prior agreement notably included bundling of the media giant’s linear channels and streaming service. But that has not resulted in a new contract. Talks between Disney and DirecTV have been held every day week, but Disney executives say DirecTV has not “meaningfully engaged” on proposals made to the carrier.
In a recent blog post, DirecTV chief content officer Rob Thun lamented a growing split between traditional dealmaking for distribution agreements such as this and accelerating programming and consumption changes across the media industry.
“While [direct-to-consumer] offerings have evolved, pay-TV packages have remained largely unchanged,” Thun wrote. “Instead of allowing distributors like DirecTV to also develop smaller, more tailored packages at prices that reflect the value they get from the content, programmers have continued to impose and enforce strict bundling requirements through exorbitant minimum penetration rates.”
Venue of Discord
Disney’s participation in Venu Sports, the sports-oriented joint venture with Fox and Warner Bros. Discovery, is also a flash point in the dispute. FuboTV’s legal challenge against Venu Sports has led to a preliminary injunction against the debut of the service, a subsequent appeal, and criticism of the court decision from ESPN chairman Jimmy Pitaro. But DirecTV is also taking aim at the new service.
“We disagree with Venu’s anti-competitive strategy and believe that distributors should have the same flexibility to thrive along DTC services by offering genre-based packages that extend beyond sports to include locals, entertainment, news, family, movies, and others,” Thun wrote.
Connolly, however, says they have presented precisely these kinds of more tailored options, including a sports-centric linear bundle based on ESPN and ABC.
“A lot can happen in the next two and half days [until the contract expiration],” Connolly says. “But there’s still a lot of work to do.”
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