This week, Disney-owned channels went dark on Spectrum, the second-largest cable TV provider in the United States. Now during a call with investors Spectrum said that the current system is broken and is proposing a new model that creates better choices for its customers.
At the core of this fight seems to be Disney’s plans to launch a direct-to-consumer streaming service for ESPN. Now Spectrum is asking Disney to agree to let Spectrum sell bundles of its streaming services at discounted prices. According to Spectrum, this new model “creates the pathway for Disney to stabilize its linear losses and grow its DTC business, ultimately preserving cash flows.”
Spectrum went on to say that Disney’s traditional approach would result in a dramatic increase in the cost to consumers. So now Spectrum is proposing a new model for cable TV.
Why is Spectrum doing this now?
Spectrum says Disney’s streaming services have sped up the decline of cable TV. With the launch of Disne+, Spectrum says viewership on the Disney Channel dropped. Now Spectrum says with ESPN’s own direct-to-consumer service launching soon its time to make changes in how cable TV works.
So what exactly is happening?
In short, Spectrum is asking Disney to bundle streaming services with a small number of TV channels. These bundles would be at a discounted price that Spectrum could sell to its internet customers. Spectrum also wants Disney to offer its streaming services including Disney+ for free to Spectrum customers who pay for Disney channels.
Disney is reportedly, according to Spectrum, asking for a large price hike on its channels and wants to force Disney channels into more packages. Spectrum says this would result in price hikes for its customers.
How would bundles of streaming services help cord cutters & Spectrum?
Spectrum is hoping it will, for example, be able to offer a bundle of Disney+ and ESPN’s new streaming service at a discounted price. Spectrum even wants to be able to offer discounted bundles of Disney+ and a handful of cable TV networks.
Spectrum is also asking Disney to make Disney+ and the new ESPN streaming service free to Spectrum customers.
Here is exactly what Spectrum said it is proposing:
Aggregate the ad-supported streaming apps from cable network brands into packaged linear products at an affordable price point, creating the most compelling consumer proposition in the marketplace.
In parallel, help market programmer streaming apps to broadband subscribers utilizing the full complement of Charter’s sales and marketing distribution capability.
Charter offered to accept Disney “market” rate increases in exchange for bundling ad-supported DTC apps with packaged linear products, and lower penetration payment minimums to provide packaging flexibility to customers. Charter has also offered to market the Disney DTC apps to its broadband customers. Disney declined.
Spectrum says it is willing to move on from the cable TV model:
During a call with media and investors, Spectrum made it clear that if Disney is not willing to a new distribution model they will be willing to walk away from Disney. Spectrum said this includes being willing to focus on offering bundles of streaming services to its internet customers. Spectrum also talked about working with free providers like Xumo to offer TV options to its customers.
If Spectrum gets it way, it could dramatically change how TV works. If Spectrum fails and walks away from Disney, that also could for ever change how TV is viewed in 2023. No matter what happens a point of no return has been reached as cord cutting puts pressure on traditional media companies.