Disney, Time Warner Cable reach carriage deal

2:35 PM PST 09/02/2010 by Georg Szalai, AP

Content pact called Disney's 'most expansive' ever

Two industry giants managed to sign the biggest network carriage deal of the year just in time for Labor Day weekend.

The Walt Disney Co. and Time Warner Cable, the nation's second-largest cable operator, Thursday afternoon unveiled a new long-term carriage agreement after continuing to hammer out final details of the arrangement past a Thursday 12:01 am EST deadline that avoided program blackouts unpopular with consumers and advertisers alike.

Time Warner Cable will carry the programming of ABC Family, Disney Channel, Disney XD, ESPN, ESPN2, ESPNEWS, ESPNU, ESPN Classic, ESPN Deportes and SOAPnet (which will be renamed Disney Junior in 2012 and was believed to be in danger of being excluded by TW Cable), as well as four owned-and-operated ABC TV stations, including WABC in New York and KABC in Los Angeles.

A statement called the arrangement "Disney Media Network's most expansive content agreement to date."

The companies didn't disclose financial terms or the length of the contract. Sources have said though that the two parties had been discussing a contract length of three years or longer. The run time they settled on was more than five years, according to one source. Cable customers of TW Cable affiliate Bright House Networks are also covered by the deal.

And analysts had predicted a 5%-10% networks fee hike for Disney in the final deal. Janney Montgomery Scott analyst Tony Wible estimated that such a hike could boost Disney earnings by 2 cents-3 cents per share. For the ABC stations, analysts had predicted payments of 40 cents-60 cents per subscriber per month.

Both sides can point to positives in the arrangement, which Miller Tabak analyst David Joyce in a first reaction called "a kitchen sink agreement."

Disney will be happy to have all its networks and owned-and-operated ABC stations in TW Cable markets covered by the deal and receive retransmission consent fee payments for the latter. Some Wall Street analysts had feared TW Cable may decline to carry smaller networks, such as SoapNet.

Meanwhile, TW Cable can point to a long run time, which distributors prefer, while content providers tend to want to renegotiate more regularly to get the best value out of their networks. TWC also secured new content offers in the deal, including on growing VOD and digital platforms.

For example, it will get a new service, not available to any other distributors at this stage, called ESPN Goal Line, which the firms described as "a super-highlight channel" for sports tier subscribers set to launch as early as Saturday. It will take fans around the best matchups each Saturday during the NCAA football season. A similar service called ESPN Buzzer Beater will be available for the college basketball season.

Also covered by the agreement is ESPN3.com, the sports broadband video network, which was a key issue of contention in the talks. It will be available "to all cable subscribers who get ESPN," according to a statement. ESPN is generally available to people who get expanded basic cable subscriptions or higher from TWC.

The language in the statement signals that TWC may pay for ESPN3.com differently from other distributors who are believed to generally pay about 10 cents per broadband, rather than cable, subscriber. The cable operator likely pays a different fee structure and can use the new approach to make the case it won't pay for subscribers who use broadband services, but may have no interest in sports. "We achieved a fair exchange of value while reinforcing the value of the video subscription business," an ESPN spokeswoman said.

The addition of ESPN3.com also gives TW Cable and Bright House the rights to feature cleared content from ESPN3.com on their sports tiers.

The agreement also calls for the launch of ESPN 3D and increased digital access to online content and expanded VOD services for cable subscribers - a focus for both sides.

Among these services:
- A new authenticated service, which will give cable subscribers the opportunity to watch ESPN, ESPN2 and ESPNU via their broadband service and mobile Internet devices, such as iPads. Details will be announced later.

- "A new transactional VOD service for select content from the Disney/ABC Television Group," for which details weren't immediately available.

- ESPN Radio feeds in New York, Los Angeles and Dallas on TWC¹s video platform.

"The successful conclusion of this wide-ranging deal demonstrates our commitment to our distribution partners and our ability to work with them to provide consumers with an unmatched portfolio of national and local entertainment, news and sports content while continuing to strengthen both of our businesses," said co-chairs of Disney Media Networks George Bodenheimer and Anne Sweeney in a statement.

"We are pleased to have reached an agreement without any interruption in service," said TWC chairman, president and CEO Glenn Britt, adding "we look forward to launching these new and innovative products and services."

The lead negotiators on the deal were TWC chief programming officer Melinda Witmer, Ben Pyne, president, global distribution, Disney Media Networks, and Sean Bratches, executive vp, sales and marketing at ESPN and ABC Sports.
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