The closely watched contract renewal talks between Altice USA and The Walt Disney Co. ended in an agreement that, on the surface, appears to give the programmer at least some of the subscriber guarantees it was looking for, while affording the cable provider some much-needed pricing relief.
The deal is widely expected to serve as a template for future carriage pacts for Disney, which has said that renewals involving more than half of its subscriber base will come due by 2019.
The basics of the new multiyear pact: Altice USA’s New York area Optimum unit will continue to provide customers access to broadcast station WABC, Disney Channel, Disney Junior, Disney XD, ESPN, ESPN2, ESPNU, ESPNEWS, ESPN Deportes, ESPN Goal Line, ESPN Bases Loaded, ESPN3 and Freeform, and will offer additional multiplatform, digital and expanded on-demand content from Disney. Optimum will add ESPN’s SEC Network in late 2018 and launch ACC Network (in place of another ESPN network, expected to be ESPN Classic) in August 2019.
The companies also expect to collaborate on ESPN’s direct-to-consumer product, which is slated to launch in early 2018, and have agreed to leverage Altice USA’s data analytics platform.
The pact — which some thought might only come after at least a brief loss of Disney content for Optimum customers — avoided a blackout of the ABC broadcast station, ESPN, Freeform or other services to Altice USA’s 2.6 million customers in New York, New Jersey and Connecticut.
The prior pact expired at midnight on Oct. 1. After a brief extension for the Yom Kippur holiday that pushed the deadline to 5 p.m. that day, the two parties said at 5:29 p.m. that they had an agreement in principle and were hammering out terms. They sealed the deal on Oct. 5.
Along with dropping ESPN Classic, people familiar with the agreement said Altice USA agreed to retransmission fee increases for WABC — at what some reports estimated was twice the previous rate — and more moderate increases for ESPN and Freeform.
Disney received reasonable fee increases and greater carriage for two regional networks, and, according to sources, increased the mandatory minimum carriage requirements for its ESPN networks — a key objective for Disney.
Disney had previously required ESPN to be available to as many as 90% of a distributor’s video subscribers but, recently, had allowed those mandatory minimums to fall to about 80%, according to an earlier research report by MoffettNathanson media analyst Michael Nathanson. People familiar with the deal said ESPN got closer to the 90% level with this agreement.
Pivotal Research Group CEO and senior media and communications analyst Jeff Wlodarczak speculated that any concessions Altice made regarding minimum carriage and taking on new networks were offset by what could be “materially lower price increases” for Disney’s channels.
“Altice paid less but likely has less flexibility to price lower end video bundles, which is less of an issue for them in the Optimum footprint given high per capita incomes,” he said.
Mike Kelly, former CEO of The Weather Channel and current CEO of Kelly Newman Ventures, said the Disney networks not going dark during the negotiation period was a sign the programmer still has some clout.
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