ESPN (DIS) has had an eventful week. The company finalized a distribution deal with Altice (ATUS); terms of which are particularly notable, as the deal represents the first of several renegotiations in a new round of carriage fee talks with pay-TV operators. On the content side of the business, the company announced a partnership with Cycle Media to create branded original programming and acquired the broadcast rights to Formula 1 racing (FWONA), beginning in 2018. As for talent, the company hired Katie Nolan, formally of “Garbage Time” on FS1 and confirmed reports of a new late-night show on ESPN2, hosted by Barstool Sports’ Big Cat & PFT Commenter.
Howie Long-Short: In the end, Altice caved. They agreed to pick up nearly every ESPN channel (including the SEC & ACC Networks), implement a rate increase for those channels and raise minimum household penetration thresholds. What choice did they really have? It’s not like they can afford to let subscribers walk. As for the FWONA deal, it’s noteworthy that the terms enable the racing organization to maintain OTT rights to their races.
Fan Marino: Nolan is a star that FS1 oddly wasn’t using. She’s got a great sense of humor, a sharp tongue and Sports Emmy to her name; a strong addition to the ESPN roster. For those not familiar with Big Cat & PFT Commenter, they are the hosts of Pardon my Take; a sports podcast that draws 2 million listeners/episode. You don’t have to be a fan of Barstool to like these guys. PFT is one of the funniest personalities in sports.
After a big week, ESPN is becoming cool again
Disney (DIS) and cable operator Altice USA (ATUS) have released a joint statement stating an agreement in principle has been reached, that the companies have extended Sunday’s deadline to finalize terms of the new deal and that ATUS would continue to carry DIS channels as negotiations continued. The deal ensures NYC area baseball fans can watch Tuesday’s Yankee-Twins playoff game (8p on ESPN). The dispute is rooted in the amount DIS wants ATUS to pay to continue carrying ESPN, ABC and other DIS channels on its Optimum cable service. In comments to the media, Altice has argued that Disney has asked for an “outrageous” increase over the terms of their expiring contract, considering viewership declines. DIS responded saying that ATUS charges their average customer $160/mo., with the “bulk of that money going in to their pocket”.
Howie Long-Short: Contract talks with Altice were the first of several Disney will have to have with cable operators over the next 2 years. In fact, contract negotiations over the next 24 months will cover more than 50% of Disney’s total pay-tv customer base; so setting the tone with this deal was crucial. DIS got a price increase (granted not as large as they had asked for) and convinced Altice to pick up carriage of the ACC & SEC networks. DIS won this round of negotiations and now appears well positioned moving forward. It’s clear cable operators will still pay for pricey sports channels despite viewership declines and streaming becoming more prevalent.
Fan Marino: Altice becomes the first cable provider to pick up carriage of the ACC Network. DIS plans to launch the new channel in 2019. NYC Optimum subscribers win here too; now receiving access to more P5 live game action.
Disney, Altice reach deal that avoids ESPN blackout
Disney’s (DIS) contract with cable operator Altice USA (ATUS) expires at the end of the month and the ESPN parent company is asking ATUS to carry the ACC Network, the SEC Network and expand distribution of the ESPN flagship channel (i.e. less skinny bundles w/o it) within the NYC market, as conditions for a renewal. Should talks fail, subscribers would lose access to ESPN. Verizon Communications (VZ), ATUS’ main competitor in the market would likely be the beneficiary should disenchanted subscribers opt to make a change. It is the first of several TV distribution contracts that DIS will work to renew over the next 2 years. If successful, the approach will help DIS stem the loss of subscribers cutting cable or subscribing to skinny bundles that exclude live sports.
Howie Long-Short: Altice became a player in the NYC market when it purchased Cablevision and acquired their 2.4 million subscribers. The company recently announced a one-year, $1.2 billion share buyback plan, that reflects the company’s confidence in hitting near-term financial targets and boost shareholder returns.
Fan Marino: More than 90% of NYC isn’t going to be pleased with the incremental cost increase associated with the addition of the ACC & SEC Networks; but NYC CFB fans are about to get high quality football, heavily subsidized by their irreverent neighbors. Now, if they would only add the Pac-12 Network…
ESPN Pushes College Channels on Altice in New Fee Talks