Walt Disney Co. DIS and pay-TV provider, DirecTV, owned by AT&T Inc. T and TPG Capital are currently in contract renewal talks that could reshape the pay-TV landscape.
What Happened: DirecTV intends to change the long-standing contract terms that require cable and satellite TV distributors to bill customers for channels like ESPN, regardless of whether they view it or not, reported Bloomberg, citing people familiar with the discussion.
The pay-TV provider plans to offer smaller, genre-specific channel packages, such as kids’ programming, movies, news, local stations, sports, or Spanish language.
See Also: Apple To Unveil iPhone 16, Watches, And AirPods At September 10 Event: Report
Disney is reportedly open to offering sports-specific packages to other distributors and is willing to negotiate lower minimum subscriber guarantees.
If an agreement is not reached, channels such as ABC and ESPN may be blacked out starting Sept. 1, the report noted.
Last week in a blog post, Rob Thun, chief content officer at DirecTV, hinted that consumers are seeking more flexibility and lower prices, similar to streaming providers like Netflix.
"Pay-TV subscribers have been declining because of our collective failure to evolve to meet consumer preferences," he stated.
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Why It Matters: DirecTV’s negotiations with Disney come on the heels of its transformation into a streaming service.
Earlier this month, it was reported that to retain customers who are increasingly opting for streaming services, DirecTV has decided to eliminate the need for a satellite dish to access its content.
The PayTV provider has also raised concerns. In June National Football League lost a jury trial where the league and DirecTV were accused of conspiring to inflate the cost of subscriptions.
Meanwhile, Disney has reported a strong third-quarter earnings. For the first time, the company's combined streaming business including Disney+, Hulu, and ESPN+ turned a profit.
Photo Courtesy: Direct TV Website
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