Disney’s plans to renew its deals with TV distributors are coming under pressure as the firm looks to launch its own direct-to-consumer services.
Disney is warning customers of Verizon's Fios that they may lose access to Disney channels — including ESPN, local ABC stations and other channels — if the two parties can’t come to an agreement on how much the TV provider should pay.
Disney has prepared an ad to run on its channels to alert Verizon customers.
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“Our proven history of providing extraordinary value to consumers and distributors is unmatched," Disney said in a statement. "Our negotiations continue in earnest and we remain optimistic that we can reach a deal.”
Adria Tomaszewski, a spokesperson for Verizon, said the company was "actively negotiating with Disney to ensure the best deal for our customers."
The battle comes amid Disney's efforts to ramp up its own online video offerings, which can be sold directly to the consumer without the need to go through a cable TV system.
Disney has already launched an online version of ESPN called ESPN+ with sports programming that isn’t on the flagship channel. It costs $5 per month.
Disney is also planning an entertainment service to launch in 2019 called Disney+, with movies and shows that were once licensed to Netflix. Disney is also poised to own 60 percent of Hulu once its acquisition of Fox is approve. Executives are expecting to close that deal in the final week of January, according to one person familiar with the deal who was not authorized to speak publicly.
Verizon's Fios service counts 4.5 million TV subscribers and 6 million broadband subscribers. Verizon and Disney have previously battled over the fees paid to carry the company's TV channels. In 2015, Verizon tried offering a skinny bundle, leaving ESPN out. Disney then sued the company and refused to air Verizon advertising until the dispute was settled.
Typically during negotiations, program makers ask distributors to increase what they pay for programming while distributors argue that they need to keep the costs of video bundles down so that subscribers don’t dump packages and opt for cheaper online services instead.
Disney’s ESPN is the most expensive channel for distributors, commanding $8.14 per month from each subscriber, according to SNL Kagan estimates. Disney argues that ESPN is one of a few channels that keep subscribers paying for TV.