The mouse returns: DirecTV and Disney strike a deal to end blackout

Good morning, and welcome to the Essential California newsletter. It’s Sunday, Sept. 15. Happy start to Hispanic Heritage Month. I’m your host, Andrew J. Campa. Here’s what you need to know to start your weekend:

Disney returns to DirecTV after settling dispute over pricing, bundling packages

For 13 days, satellite and streaming subscribers in DirecTV’s roughly 11 million customer homes faced a black screen whenever they turned to ESPN, ABC or Disney channels.

A white script told them “Disney wants you to miss out on Monday Night Football on ABC and ESPN while DIRECTV works to reach a new agreement.”

The message frustrated viewers who planned on watching USC’s season-opening win over LSU on Sept. 1 and those who wished to catch up on U.S. Open tennis tournament action. Tuesday’s presidential debate moderated by ABC was also blacked out.

Channels owned by Walt Disney Co., including ESPN and ABC, were knocked off DirecTV platforms on Sept. 1 after the parties failed to reach a new distribution deal.

Days of missed programming ended Saturday as Disney and DirecTV reached an accord, as reported by my colleague Meg James.

What led to an agreement?

This detente happened a day before ABC was set to host the 76th Primetime Emmy Awards and allows DirecTV to resume airing normal programming like “Monday Night Football” and its fall prime-time lineup.

The nearly two-week battle has been costly.

Thousands of subscribers canceled their service during the blackout, DirecTV acknowledged recently. The satellite TV giant wanted to stop the bleeding.

What changes?

After marathon negotiations, the companies said they reached an “agreement in principle,” which contains hikes in the fees DirecTV pays for Disney programming.

DirecTV came away with wins in the new contract, too. It gained the ability to offer Disney channels in genre packages, including sports, general entertainment and a “kids & family” package. DirecTV also can offer Disney’s streaming services — Hulu, ESPN+ and Disney+ — to customers who subscribe to certain packages as well as on an a la carte basis. That will include the ESPN streaming service that Disney plans to launch next year.

“Through this first-of-its-kind collaboration, DirecTV and Disney are giving customers the ability to tailor their video experience through more flexible options,” the companies said in a joint statement.

What led to this fracas?

The dispute underscored the strain facing traditional pay-TV distributors amid the shift to streaming.

A shrinking pool of big-bundle subscribers increasingly has been asked to shoulder higher programming expenses.

The cost of carrying broadcast channels (ABC, CBS, Fox and NBC) and sports networks, including ESPN, has skyrocketed as programmers look to pass on fee increases they’ve agreed to pay sports leagues. ESPN is the most expensive basic cable channel, costing pay-TV distributors nearly $10 a month per subscriber home.

Sports costs became a major rub in the recent dispute. Another sticking point was Disney’s requirement that its channels be available in most of the DirecTV and U-Verse homes.

Disney has long demanded that its channels reach about 90% of DirecTV’s subscriber base. ESPN’s minimum threshold is around 82%.

Pay-TV companies such as DirecTV must pay penalties if they fail to meet that “minimum penetration.”

Is there a chance we’ll see blackouts again?

Blackouts have become increasingly common as industry economics erode. Last year, Disney channels went dark for nearly 12 days on Charter Communications’ Spectrum service during a similar tussle over fees and flexibility to offer Disney’s streaming services to its customers at no additional charge.

Charter, DirecTV and other distribution executives have chafed at Disney’s efforts to bypass distributors to offer its programming directly to consumers. Disney plans to roll out ESPN as a streaming service next year.

The Burbank giant also teamed up with Warner Bros. Discovery and Fox Corp. this year to offer a $43-a-month package of sports channels called Venu. But last month, a federal judge granted a temporary injunction, scuttling the fall launch of Venu, on antitrust grounds.

So, customers will watch ABC, Disney and ESPN again… until the next blackout.

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Column One

Column One is The Times’ home for narrative and longform journalism. Here’s a great piece from this week:

Saturdays are usually busy days for Alma’s Place, a soul food restaurant in Compton across from the city’s courthouse. But roughly an hour into opening on June 22, Corina Pleasant, who runs the business with her mother, Alma, noticed no customers were filing in. Their parking lot, which is shared with other small businesses in a strip mall, was overrun by cars and chaos as hundreds of people poured to the courthouse to catch a glimpse of rap star Kendrick Lamar, who was there to film the music video for “Not Like Us.”

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We had met on Instagram. We were both alumni of the same college. He had swiped up on one of my Instagram Stories: a snippet from an Andy Warhol interview with Joan Didion. “This is perfect, what is this from?” he asked. We texted back and forth about Didion, Southern California and the drought that had marked our teenage years. We bonded over the irony of leaving our hometowns only to return.

Have a great weekend, from the Essential California team

Andrew J. Campa, reporter
Carlos Lozano, news editor

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