- Disney and Charter’s public contract battle could hasten the shift of sports rights to Big Tech.
- Distributors are making it harder for legacy media companies like Disney to bid for valuable sports content.
- Companies like Amazon and Apple have been able to pay high prices that legacy media can’t.
Disney and Charter Communications’ very public contract battle could have downstream effects on sports rights — and the soaring prices they’ve commanded to provide TV’s most valuable content.
Charter, one of the biggest cable companies with nearly 15 million subscribers across 41 states, wants to give its subscribers the ability to opt out of cable packages that include pricey sports networks.
Sports is crucial to driving viewership for Disney and its peers — and in turn, the payments they can extract from cable companies — and that’s why media companies have continued to pay up for sports rights, even as the prices have soared.
Total US TV and streaming media sports rights are expected to top $30 billion by 2025, roughly doubling over the past decade, according to S&P Global Market Intelligence.
The backdrop is that media companies like Disney have been struggling to get to a profitable streaming future as their linear businesses decline. One way they’re doing that is by funneling valuable content away from linear and into streaming. Comcast’s NBCUniversal and Paramount offer most of their sports on streaming, and Warner Bros. Discovery is adding sports to its streamer Max. Fox and Disney’s ESPN are expected to go down a similar path in 2025.
Media companies that have been most aggressive in this way face a Catch-22. They want to give sports leagues as much distribution as possible to have an advantage when bidding for sports rights. But airing sports outside the cable bundle also gives sports fans an incentive to escalate cord-cutting, diminishing their value to distributors like Charter.
Charter and other distributors are pushing back, unwilling to charge their customers more for a linear offering that’s being stripped of the most desirable content. In its recent proposal, leading to an impasse with Disney, Charter wants to be able to offer them Disney’s streaming services for free, including a planned streaming version of ESPN.
It’s a feud that’s been long brewing as linear viewership has been on the decline, say experts who spoke to Insider about what it means for legacy media companies and their ability to remain competitive for sports rights.
“Historically, I felt media companies had the advantage with the content,” Naveen Sarma, senior director of US Media & Telecom at S&P Global Ratings, told Insider. “The cable companies inevitably gave in. The media companies seemed to get a lot of what they wanted. For the past couple years, we’ve wondered why the cable companies weren’t taking the stand.”
If Charter prevails, Disney could forgo a lot of money it’s getting from consumers who pay a monthly fee starting at $15 for a Disney Plus-Hulu-ESPN bundle. That’s revenue it’s counting on to meet its stated goal of getting its streaming business in the black by 2024. And if Disney holds the line and Charter walks away, as it’s threatened to do if it doesn’t get terms it wants, Charter takes with it the $2.2 billion in annual revenue it says it pays Disney to carry its channels.
It’s not just Disney. Charter is likely to be making the same demands of other broadcasters of sports rights. WBD, whose Max starts at $16 a month for its lowest-price tier, also has a lot to lose. WBD CEO David Zaslav hinted back in November that the company didn’t “need” the NBA but has since retreated from that stance, saying he hoped WBD would offer NBA games for the long term. Disney and Fox have been the most reliant on sports, getting 45% of their viewing from sports in 4Q last year, according to UBS.
If distributors succeed in flexing their muscle, media companies would no longer be able to pass the costs of those big sports leagues on to the distributors and their viewers.
“If broadcast and cable networks are unsure of their distribution future,” LightShed Partners wrote in a September 5 note, “they will not be able to pay higher and higher fees for sports rights. In fact, they may need reductions in sports rights fees to survive.”
One set of bidders doesn’t have that problem: Big Tech. Amazon, Apple, and YouTube have been aggressively bidding on sports rights and could make further moves into the space if legacy media can no longer stomach the higher prices. The loss of that competition could dampen prices, though, LightShed wrote.
Marty Conway, a professor of sports management at Georgetown University and former Major League Baseball executive, told Insider he believes leagues have no interest in giving on fees or audience reach. He sees the NFL, NBA, and MLS still squeezing out big fee increases through deals with the likes of Amazon and Apple that give them access to new markets and data that traditional media companies lack.
“Tech companies aren’t just going to replicate the pay-TV model,” Conway said. “Some of the tech and streaming companies have the ability to be global and create custom packages for leagues. There’s a lot of information the linear guys didn’t have.”
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