Disney Says ‘Fairly Sizable Gap’ Remains in DirecTV Carriage Talks as Deadline Looms

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Disney and DirecTV are heading into the 11th hour of carriage negotiations as the two parties are actively seeking to avoid a programming blackout and strike a deal before the current agreement’s expiration on Sunday. Talks between the two companies are currently happening in-person at DirecTV’s headquarters in El Segundo, California.

DirecTV, which is now a private company owned by AT&T and private equity firm TPG, has more than 11 million subscribers. According to Nielsen, over 90% of DirecTV households watched Disney’s linear networks every month last year – amounting to more than 5 billion hours viewed in a single year.

“We’re engaged in a fairly consistent and steady back and forth with DirecTV, although I’d say we’ve got a fairly sizable gap on a number of fronts in terms of where we are in the negotiation,” Disney Platform Distribution president Justin Connolly told TheWrap Thursday evening.

In a blog post earlier this month, DirecTV chief content officer Rob Thun called on programmers to collaborate on more flexible packages with genre-based programming instead of requiring customers to have channels that they don’t want. He added that price points should be closer to those offered by DTC services and the ability to watch and pay for that programming should be available through one aggregated platform rather than “numerous disjointed entry points.”

“Unfortunately, while DTC offerings have evolved, pay TV packages have remained largely unchanged. Instead of allowing distributors like DirecTV to also develop smaller, more tailored packages at prices that reflect the value they get from the content, programmers have continued to impose and enforce strict bundling requirements through exorbitant minimum penetration rates – the minimum proportion of a distributor’s subscribers required to access a channel,” Thun said.

“These antiquated requirements force pay TV customers to subscribe to many channels they may not watch, which have yielded ‘fat bundles,’ he continued. “At the same time, programmers have reserved flexible genre-based offerings solely for themselves, eroding the price-value proposition for pay TV customers by shifting the best programming to DTC services while raising programming fees on pay TV.”

Speaking with TheWrap, Connolly argued that Disney has offered options it believes will give DirecTV’s customers more flexibility, such as bundling its linear networks with its SVOD services like its agreement with Charter Communications earlier this year, and that DirecTV’s genre-based packaging proposal lacks specifics.

“Our view is we’re happy to engage in that conversation and that dialogue when you have more specifics, but we’re not going to let you warehouse rights from the Walt Disney Company because of something you might develop or create or imagine down the line,” Connolly said.

He added that the subscriber declines in the linear TV ecosystem are less about flexibility and genre-based packages and more about investing in a product experience that is “slick and dynamic.”

“That is not what DirecTV has been doing, either on their satellite platform or their streaming platform, DirecTV Stream,” he said. “They want to point the finger at programmers and I just fundamentally believe that where people are investing in the experience and investing in the marketing and the consumer engagement tends to trump the other factors here.”

He added that Disney is focused on making sure that an agreement reflects the value of its portfolio, while DirecTV is focused on getting a “sweetheart deal.”

“From our perspective, they keep seeking discounts across the board, whether that be on distribution thresholds or rates or otherwise, and in combination, that leads us to a pretty difficult place, whereas our interest is in having them recognize the value and pay us in line with what other large or larger distributors pay us,” Connolly said. “We know what the value of our content is and our focus is to ensure that DirecTV understands that and steps up accordingly.”

“They want a deal that is better than what anyone else in the marketplace has done. They’re a private equity play and this isn’t a public service for them. We still have our eye on the consumer and the value that we bring in these relationships on behalf of the Walt Disney Company,” he continued. “Our goal is, and always is, to try to resolve this at the negotiating table and ultimately find something that benefits all parties, especially the consumer. Our hope is that DirecTV will join us in that effort and try to finalize a deal so that their customers aren’t caught in the middle of this.”

A DirecTV spokesperson told TheWrap that the company is in “active discussions to deliver greater flexibility and choice at the right value, not just options that deliver the most value to The Walt Disney Company.”

While the company has expressed an openness to an agreement with Disney similar to the Charter deal, it has pointed to analyst estimates that less than 10% of Charter customers have activated Disney+ and that less than 4% have used ESPN+.

The ongoing dispute comes ahead of the start of the college football and NFL seasons on Sept. 1 and Sept. 9, respectively. ABC is also preparing to host the first presidential debate between Kamala Harris and Donald Trump on Sept. 10 and the 2024 Emmys on Sept. 15.

In addition to DirecTV, Disney’s networks are available on other satellite providers like Dish Network, cable providers like Charter or Comcast, or virtual MVPDs like YouTube TV or Hulu + Live TV.