It’s no secret that the TV business is in upheaval. And in the sea of struggling companies, satellite TV distributors may be in the most precarious position.
That unforgiving economic reality has been thrown into sharp relief by a bitter dispute between DirecTV and Disney that has dragged on over the past two weeks.
In many ways, the two businesses are engaged in a routine fight between a television programming company and its distributor that results in a service disruption. In this case, many of the satellite provider’s roughly 11 million customers haven’t been able to watch popular programs like the U.S. Open and Monday Night Football.
But DirecTV has significantly less negotiating leverage than its competitors in traditional TV. That’s because satellite companies don’t have the same hook to retain customers when the channels go dark: internet access.
Unlike Comcast and Charter — U.S. cable TV heavyweights whose businesses are anchored by broadband internet access — satellite TV companies like DirecTV and Dish are primarily TV services, making it easier for customers to cancel in favor of streaming alternatives like YouTube TV, Hulu Live+TV or Fubo, a sports-focused streaming service.
Satellite TV’s other disadvantage: Unlike cable TV, basic satellite TV technology does not allow viewers to watch content on demand. Instead it offers a large menu of shows and movies, with the option to record with a DVR. But satellite TV still resembles a traditional broadcaster and is out-of-step with the current era of streaming video.
“Satellite started to to lose ground to cable even before cord-cutting,” said Craig Moffett, an analyst for MoffettNathanson. “Then subscription-video-on-demand models like Netflix really started to take off. Once they did, everybody was at a disadvantage. But satellite is particularly disadvantaged.”
The numbers bear out a dire situation for satellite TV. Just 13 million U.S. households subscribe to it, a decrease of about 15.3 percent from last year, according to figures from MoffettNathanson. (Cable TV subscriptions fell 11.2 percent from the previous year, to about 33 million U.S. households.)
DirecTV, which is owned by AT&T and the private-equity firm TPG, is among the biggest satellite TV providers in the United States, alongside Dish Network. In a nod to the rising power of streaming services, DirecTV also sells an on-demand TV service, DirecTV Stream, which offers subscribers access to a bundle of channels without a satellite dish. The company recently told customers it was raising its prices for DirecTV Stream to “remain competitive in the marketplace.”
A spokesman for DirecTV referred The New York Times to remarks from its chief financial officer, Ray Carpenter, who acknowledged on a call with analysts last week that competitors like Charter have “other products that they can sell,” adding that DirecTV needs “something that is going to work for the long-term sustainability of our video customers.”
“It doesn’t mean that we’re not going to work as hard as we can to find some sort of agreement,” Mr. Carpenter said, “but we definitely did not go into this thinking, let’s just see how much of this we could leverage before the Monday Night Football game comes around, and then we’ll make a deal.”
DirecTV also said in a statement that it had made “considerable progress” in its negotiations with Disney on issues including market rates and “the ability to offer smaller, more flexible packages.”
As is customary in such contract disputes, both Disney and DirecTV have blamed the other side for the recent outage. Disney has said that DirecTV “undervalues our portfolio of television channels,” depriving customers of must-see programming like the National Football League. DirecTV has argued that Disney wants to charge traditional TV customers more money for less content, pointing to the company’s considerable investment in streaming services like Disney+.
“Consumer frustration is at an all-time high as Disney shifts its best producers, most innovative shows, top teams, conferences, and entire leagues to their direct-to-consumer services while making customers pay more than once for the same programming on multiple Disney platforms,” said Rob Thun, DirecTV’s chief content officer. “Disney’s only magic is forcing prices to go up while simultaneously making its content disappear.”
Though disputes between TV providers and media companies like Disney happen regularly, the outage with DirecTV has been notable, in part, because of the programs that haven’t been made available.
On Sunday, DirecTV filed a lawsuit against Disney claiming that the company was forcing providers to pay for a bundle of channels that includes “less desirable” programming, while offering its Disney+ subscribers a smaller bundle that they actually want.
Despite the inflammatory rhetoric, the dust-up between Disney and DirecTV may soon be over. Entertainment companies usually reach a deal with their traditional TV customers within a few weeks, partly because long-term outages aren’t good for either side. Deals with satellite TV companies are still highly profitable for companies like Disney, and DirecTV needs ESPN to keep its customers happy.
Last year, Disney reached a deal with Charter after channels went dark for roughly a week, agreeing to offer Charter’s customers streaming subscriptions at a wholesale rate. The only questions this year are whether the two sides will reach an agreement before DirecTV’s customer losses begin piling up — and how long satellite TV can put off the inevitable decline of its business.
The post Satellite TV Is in Trouble. DirecTV’s Dispute With Disney Shows Why. appeared first on New York Times.
