ANAHEIM, CA – APRIL 06: General views of Sleeping Beauty Castle at Disneyland on April 06, 2024 in Anaheim, California. (Photo by AaronP/Bauer-Griffin/GC Images)
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Disney and YouTube TV’s carriage negotiation battle resulted in Disney pulling the ABC broadcast network and Disney networks, such as ESPN and Disney Channel, from YouTube TV subscribers.
It’s tempting to simply say it’ll all work out like the old days, but nothing in the media business is like the old days. The Disney-YouTube TV confrontation highlights the dramatic changes in media consolidation, the diminishment of local media and the continuing rise of big tech. When it comes to quick endings to carriage battles, we may never pass this way again.
Can YouTube TV And Disney Reach An Agreement?
Historically, media content providers and distributors have symbiotically needed each other. If content was king, then distribution was the crown prince.
Multichannel video as delivered by cable, satellite and telcos (sometimes called multichannel video providers – or MVPDs) succeeded as a business because of the extraordinary and enduring power of dual revenue streams for programmers and distributors. Consumers paid their monthly subscriber fees and marketers kept buying more ads at higher prices.
You don’t have to look too far to see how wounded that old model is. Both revenue streams are under massive pressure from a flood of consumer content options, from Netflix, Amazon and YouTube to TikTok and the games universe. Other than live sports, there is little or no positive ratings story to be found.
Traditional multichannel video homes (think the big cable bundle) have plunged from over 100 million in 2013 to slightly more than 50 million today. And the virtual MVPDs like YouTube TV and Hulu Live TV, as well as their subscribers, have no interest in paying for monthly sub fees for channels that they don’t watch and maybe haven’t heard of. Ratings for everything but a few marquee sports properties are down dramatically. And big tech now consumes virtually all advertising growth.
All of this means it is a lot harder to reach agreements when you are dividing up an ever-shrinking pie than one that expands over the course of decades. Whose hide gets gored the most?
Although numerous carriage fights in the last three decades have almost always resolved by allocating future growth, that isn’t necessarily always going to be the case moving forward. Much harder choices await.
Diminishment Of Local Media Ownership And Power
When the biggest carriage battles of the 1990s between broadcasters and MVPDs began to result in the loss to subscribers of their favorite local stations, cable networks and programs, both sides could expect a political backlash creating outside pressure for a deal. But the great House Speaker Tip O’Neill’s adage that all politics is local doesn’t apply much to big media or big tech anymore.
When I was in the cable business, we had local and regional cable system offices populated with senior executives who had the ear of their corporate higher-ups. Cable companies owed their franchise to relationships with local elected officials who held real power over them.
Today, cable has centrally consolidated operations and executive authority.
On the broadcast side, despite the complaints of the broadcast business about caps on broadcast station ownership, it is today a vastly more concentrated world than decades ago. Not that long ago, local broadcasters had significant technical, production and sales organizations everywhere.
Today, it is a story of consolidating operational “hubs” and workforce attrition. It makes sense in terms of economic efficiency, but now, few local communities matter individually in the grand scheme of the media business. There aren’t too many local politicians that have spent a lot of time with Disney’s Bob Iger or any other media or tech mogul. And don’t get me started on the lack of effective leadership from Capitol Hill.
The bottom line is that these battles are and will be increasingly between corporate giants disconnected from the “boots on the ground” of operations. It certainly isn’t a lot of bottoms up local pressure that moves the needle so quickly anymore.
Battles With Big Tech Have Changed The Power Dynamic
Stand-offs between cable giants and media giants were not necessarily battles of equals, but both sides played on a relatively level field.
Today, there is a whole lot more at stake for Disney – and every other traditional media company – in these battles than for YouTube TV. YouTube TV has 10 million subscribers today, and by 2026 may well be the largest single provider of multichannel video in the U.S.
Now, it accounts for upwards of $100 million in sub fees per month paid to ESPN alone. This doesn’t account for the fees paid for any other Disney networks. Morgan Stanley has estimated that Disney will be losing $30 million a week in its YouTube TV dispute. Even for a $17 billion business like ESPN, losing over $1 billion a year from one distributor is a tough pill to swallow.
By comparison, in a story you’ve heard before, the size differential for big tech giants versus traditional media is gargantuan. YouTube TV is a subsidiary of Alphabet/Google, with its annual revenues of $350 billion and market cap of $3 trillion (yup, no typo). Alphabet doesn’t even break out YouTube TV’s revenue as it isn’t legally material to the company.
Disney is no corporate wallflower, but with $90 billion in total revenue and market cap of $200 billion, it’s playing a different ball game.
It’s not going to get easier for consumers.
Where do consumers fit in here? You would think that consumers might have it better today, with so many options compared to the oligopoly of the cable/satellite/telco big bundles.
But if a customer still wants some type of package of broadcast stations and cable networks, it’s not easy.
If they’ve cut the cord, they don’t want to go back to the bloated all things cable bundle. In terms of mini bundles, you can almost always get your local broadcast stations if you live in a big market like New York or LA, but not necessarily those of many other markets.
So there goes the Super Bowl, World Series, Oscars, Olympics and Grammys for millions.
Streaming Alternatives During YouTube TV And Disney Dispute
For sports fans, Fubo TV seems very appealing, but you don’t get the Warner Bros. Discovery (nee Turner) networks, so no NCAA March Madness, restrictions on MLB playoffs and no CNN. Philo is inexpensive but carries no broadcast stations and none of the top live sports networks. Hulu Live TV (like Fubo TV owned by Disney) will still get you some of your ABC stations, but it suffers the same limited availability of broadcast stations as many of the other streaming services.
None of this is a help to the future of local broadcast TV.
Disney appears all in on its ESPN app bet. The ESPN app has already gained over 2 million subscribers since its launch in August, and we will soon learn the extent to which the YouTube TV dispute moves more sports fans to buy the ESPN app as a standalone or more likely as part of the Disney streaming bundle.
Disney is offering a 12-month discount for the bundle of ESPN, Hulu (not Hulu Live TV) and Disney+ for $29.99, the usual rate for ESPN alone. Fox, which recently launched its Fox One app, will certainly be among those watching the results closely here as it faces its own distribution fights ahead. And consumers can seemingly just sit and watch – and stew – as the media future is sliced and diced around them.