Charter Communications CEO Chris Winfrey has a message for Disney in the companies’ $2.2 billion dispute over cable television. With an estimated 15 million missing out on ESPN and live sports since the country’s largest cable carrier was unable to agree terms with one of the dominant content providers, Winfrey was asked at a Goldman Sachs event on Thursday about a sportsless future. He called the possibility “more and more of a potential reality.”
As of September 1, Charter took the unprecedented step of blacking out all Disney-owned channels on its cable boxes. Charter wants Disney to grant its customers free access to the Magic Kingdom’s various streaming services, such as Disney+ and ESPN+, arguing that the current financial model of cable television, where programmers receive a fee from cable companies who then pass the cost on to their consumers, no longer works in the days of a dying cable business.
“We had to say enough is enough, or else we’re gonna have to move on to a different model,” Winfrey said.
Disney says Charter rejected multiple offers to extend negotiations and keep its channels on Charter’s airwaves, according to a company statement provided to Fortune.
If Charter were indeed to move forward without Disney’s channels, its cable package would be a smaller, cheaper “general entertainment” package, Winfrey says. One of the main reasons for the pared-down version of cable is that without Disney’s sports juggernaut ESPN, Winfrey doesn’t think Charter would renew most of its other sports offerings. This would be a dramatic change for the TV business, as sports contracts from cable TV, led by the NFL’s $110 billion package with three major networks, ESPN and Amazon Prime, form the backbone of both the sports and TV industries.
ESPN has been the big dog in cable TV for over a generation, commanding an average carrier fee of $9.42 per month, according to Sportico, from every cable subscriber, whether they actually watch a 24-7 sports channel or not. In fact, the high fees that ESPN commanded in the cable TV “bundle,” from sports and non-sports fans alike, was a major contributor to the cord-cutting era, the birth of Netflix, the streaming wars, and the epic entertainment saga that led to this moment.
Winfrey claims that the longer the dispute drags on, the less interest Charter has in reaching a deal with Disney at all. Winfrey reasons that any loss of customers in the meantime will actually help Charter’s business by revealing those who want a sports offering, which Charter can offer through either streaming or video on demand services, and its core general audience. In that scenario, he said, Charter would “be self-selecting for customers who are actually looking and willing to pay that type of price for sports content.”
Winfrey essentially envisions a hybrid future for television in which streaming and linear are bundled together. He says legacy media companies —under pressure from Wall Street—cleaved their streaming and linear television business in two. “They’re focused on direct-to-consumer businesses as if it was a completely separate business,” Winfrey said. “I don’t think it’s a separate business. You have to take a look at the two together, you have a consolidated set of cash flows.”
Incumbents like Disney pursued the holy grail of a profitable streaming service by letting their “linear programming house burn to the ground,” he says. In what Winfrey considers to be a losing effort, those companies put their best content exclusively on their streaming services, thereby leaving the already struggling cable business even more impoverished. While consumers ended up worse off because they had to pay subscription fees for both cable and streaming services to watch everything they wanted. “The value of the big expanded package with everything loaded in and forcing it on customers who don’t want, don’t value, or can’t afford that content is not going to work anymore,” he said.
Winfrey outlined two other principal concerns with Disney: programmers raise prices at a rate that’s faster than the consumer price index and that rigid household minimums mean contracts force certain channels on consumers.
When asked what progress the two parties had made, Winfrey was blunt. “If I had anything material to highlight, I would. That should tell you something in terms of you know how we’re doing.”
