This column originally appeared in Read & React, Yahoo Sports' morning newsletter. Subscribe here.
Are we in the middle of the war to end all wars when it comes to streaming vs. cable?
That really depends on the outcome of the game of chicken currently being played by Disney and Charter Communications. Now, you may not be a Charter cable customer, but know this: If the two do not come to a compromise in their current dispute, the end date of the standard-issue cable bundle will be pushed up dramatically. In turn, watching sports on TV is going to get more expensive, not to mention more complicated, very soon.
The latest issue is this: In an effort to offset cord-cutting losses (which is already impacting Disney-owned ESPN somewhere between $2-3 billion annually), Disney has turned to a premium subscription model, in this case ESPN+. The “plus” version may not be the bulk of ESPN’s business now, but it will be in the future, and in order to build up that subscription base, ESPN is putting more and more quality content behind its own paywall.
Charter, which owns cable provider Spectrum, doesn’t like that. If it’s going to pay the $2 billion annual price tag Disney wants in exchange for its collection of networks, most notably ESPN, then Charter wants to give its 15 million cable subscribers access to Disney’s premium content, ie. all the +s (ESPN, Disney, etc).
In other words, Charter is saying to Disney, “You can’t have your cake and eat it, too, not at that price.”
The stalemate has left those 15 million households — which represent about 20% of all U.S. cable subscribers — without ESPN since last Thursday. If an agreement isn’t reached this week, those 15 million households won’t be able to watch No. 4 Alabama vs. No. 11 Texas on Saturday night or Aaron Rodgers’ debut with the Jets vs. Buffalo on Monday Night Football.
While these sort of disputes between cable companies and content providers normally get worked out, this one is different.
ESPN has forever been able to bully cable providers into ponying up whatever it asks for. People can’t live without sports, the thought process went. Well, that was partly true. Some people can’t live without sports. But a lot of people can, and when a solid alternative arrived (Netflix, Prime, etc.) they cut the cord and never looked back.
Charter knows cable is a dying business. But unlike a company such as Comcast, which as a content provider has skin in the cable game, Charter can take it or leave it. And if Charter leaves the cable business behind, focusing more of its business on being an internet provider, how many of its 15 million subscribers will seek out another cable provider because they absolutely need ESPN? Not all 15 million, that's for sure.
This is the existential crisis ESPN is facing. It doesn’t have the leverage it once did. Non-sports fans no longer have to foot a bill they never wanted to in the first place but were forced to pay, because where else were they going to go to watch premium TV?
So let’s say half of those 15 million Charter subscribers find another provider because they absolutely need sports. That still leaves ESPN with a $1 billion annual void. Can that be made up via “plus” subscribers?
That depends on how many are willing to pay for it, which begs the question: How much would you be willing to pay for all of ESPN’s content … on top of what you’re already paying for other content providers? $20/month? $30? $40? (Tell us here.)
We’ve been approaching this crossroads with ESPN for a while now, and if Charter does not blink, we’re going to be there before we know it.
There’s no "bad guy" here. It’s a couple of companies trying to survive. It just so happens that their survival depends on the other one giving them something they can’t afford to give up.