Disney also indicated its carriage impasse with YouTube TV is far from resolved, and warned investors not to expect the blackout to be lifted as a result while updating guidance accordingly. The stalemate, going into Week 3 and deemed by Business Insider to be Disney’s longest blackout on record, has removed more than 20 networks from one of the fastest-growing live TV platforms in the United States.
What’s Driving the Disney–YouTube TV Standoff
At the core is price. Disney says its offer to YouTube TV is in line with or better than the terms that bigger traditional distributors have negotiated, according to comments carried by Reuters on reports issued by executives speaking to analysts. YouTube argues that Disney’s rates would require it to raise subscription prices, a flash point in a market where consumers are growing tired of increasingly high monthly bills.
The economics are unforgiving. The rights to live sports, particularly the N.F.L. and college football airing on ESPN and ABC, have exploded in cost, leaving programmers fighting for new affiliate fee revenue. Virtual MVPDs like YouTube TV work on wafer-thin margins and — unlike cable incumbents — have limited flexibility to eat up increases without jeopardizing churn. It’s that tension, in fact, which makes ESPN so valuable to viewers and both a negotiating lever and a sticking point.
What’s At Stake For Viewers And The Market
Subscribers to the service felt the pain last week as ESPN, ABC, FX, Disney Channel and other networks disappeared from YouTube TV, creating a mess for those seeking access to marquee live events like Monday Night Football.
YouTube has been giving $20 credits to impacted users and there are reports of almost 9 million subscribers on the service. On the other end, the estimate is that Disney is giving up about $30 million in weekly revenue from a blackout — dollars generated by per-subscriber carriage fees and accompanying commercials.
More than just short-term refunds for advertisers or lost ad impressions, the blackout represents a test of brand loyalty and viewing habits. You’ve got millions of people who have some time on their hands for a while, and while they’re parked at home during live sports, the captive audience goes away. Once people are exposed to what the service is like without YES Network, the more risk there is that customers get fed up waiting and cancel or switch their packages for good — whether it means switching to rival live TV bundles (which Dish doesn’t have directly as competitors) or breaking away from traditional channel packages beyond what’s already been chipped away by piecemeal streaming options.
Strategic Calculus For Disney And Google
Disney’s position seems to be coming from a larger shift toward direct-to-consumer distribution. The company unveiled its ESPN sports offering, ESPN Unlimited, which Morgan Stanley (quoted by Variety) estimates could create $500 million beginning next fiscal year. While that move doesn’t cover today’s affiliate dollars overnight, it affords Disney more leverage and long-term flexibility as it begins to lower its dependence on third-party distributors.
YouTube TV’s size, meanwhile, raises the stakes for Google. The service is already one of the top four pay-TV distributors in the nation, after Comcast, Charter and DirecTV, industry trackers said, swiftly rising as cord-cutting becomes increasingly prevalent. Losing a wide swath of Disney-owned networks weakens YouTube TV’s selling proposition — particularly for sports-focused families — at a time when retention costs are climbing and content breadth often plays as a key differentiator.
How a New Carriage Deal Might Come Together
There are recent carriage wars that hint a way forward, even if the timeline is blurry. The high-profile standoff between Charter and Disney led to a retooled model that offered up some linear networks in exchange for more extensive streaming access, suggesting that so-called hybrid packages — those combining linear channels with ad-supported streaming tiers — could be more of a template.
A middle ground here could be a tiered carriage for certain Disney networks, longer-term escalators based on sports inventory or performance-based incentives that reward engagement without committing to across-the-board fee hikes. Another such lever is bundling: wrapping streaming access to certain Disney services into YouTube TV packages, and thereby sharing the cost of programming across both linear and digital consumption.
What Viewers Can Do While the Blackout Continues
Until a settlement is reached, viewers will have slim but workable possibilities. An over-the-air antenna can also bring back local ABC stations in many markets. Sports fans can try other online live TV providers offering Disney networks at the moment — but changing services comes with its own costs and hassles. Standalone streaming apps can be a useful complement to the entertainment in your life, but live ESPN content is still mostly something you need pay-TV to watch.
What matters to their own bottom lines is sobering: Both sides indicated that they can withstand a longer fight, and the economics dictate that neither wants to establish a precedent that worsens future negotiations. So for now, the blackout stands as a high-stakes test of leverage in the shifting TV bundle — and Disney is not expecting it to end any time soon.
