One analyst forecast 'an immediate boost' for the Disney+ ad tier, but also 'some cannibalization,' while another says Disney 'will re-evaluate' several networks not covered by the pact.
, who has a “neutral” rating on Disney shares with a $94 price target: “a first down for both companies.” Nollen, like many of his peers, expects this arrangement to affect future carriage deals for Disney and other entertainment giants.
What’s in the deal for Charter? Its Spectrum Select pay TV customers will now have access to the Disney+ basic ad tier plan, “for which Disney receives a wholesale price from Charter , and Spectrum TV Select Plus subscribers will now get ESPN+ in their bundle; Charter will not pay Disney for this service,” the Macquarie analyst wrote. And “eight long-tail networks [are] now removed,” he noted.
One example of this trade-off: Charter will no longer carry eight Disney networks, including Disney Junior, Freeform, FXM, FXX, and Nat Geo Wild. Morris estimated, based on SNL Kagan data, that these networks combined represent around 11 percent of Disney’s affiliate revenue per subscriber fees. And he highlighted that the news will likely raise questions about the future of these channels.
For Charter, possibly “the biggest win” under the deal is that ESPN+ will be provided to Spectrum TV Select Plus subscribers, while the ESPN flagship streaming service will be made available to Spectrum TV Select subscribers when it launches, the MoffettNathanson analysts suggested. But they also highlighted that this was “at the same time likely something Disney knew was inevitable as part of future affiliate deals.
The MoffettNathanson analysts also highlighted Charter’s success in getting its pay-TV packages not to have to carry various Disney networks anymore. “Without knowing the specifics of the deal, it is hard to say whether price increases Disney won for its remaining networks will be enough to fully offset this loss, pegging this as a win for Charter,” they concluded.
“So ultimately who won these very visible negotiations?” the MoffettNathanson analysts asked at the end of their report. “If the framework to make the call is an evolution of prior deals to include DTC as part of a new way to provide value to subscribers along with cutting down on long-tail cable network payments, then we can see how Charter can claim victory,” they concluded.
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