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Four things we’ve learned from Disney-Time Warner Cable deal
Published September 13, 2010
Disney’s deal with Time Warner Cable earlier this month was not your run-of-the-mill carriage deal. The final agreement was much more extensive than most others that have been signed during the past decade, with Disney wrapping all of its video-on-demand, broadband, mobile and television rights into one big package.
ESPN’s lead negotiator, Sean Bratches, went so far as to describe the mobile part of the deal as “somewhat historic.” He’s not far off.
The deal highlights several significant changes in the cable business. Here are my four biggest takeaways from it.
1. Retransmission is not an issue anymore.
Where are the retrans wars that we’ve all been expecting? They’re simply not happening.
That’s my biggest takeaway from Disney’s new carriage deal with Time Warner Cable: Retransmission consent isn’t as big an issue as everyone thought it would be.
Cable operators have agreed to pay for the broadcast channels that they previously have retransmitted for free. The only tension right now is in coming up with a price for them. In other words, it’s the same tension Disney and ESPN have when they cut carriage deals for their cable channels, like ESPN and ESPN2.
The truth is that the price point for broadcast channels generally has been set from retrans discussions that others, like Fox and CBS, already have had. Several sources said that Time Warner Cable agreed to pay between 40 cents and 50 cents a subscriber per month at the beginning of the contract for ABC’s owned-and-operated local broadcast channels.
To show how standard retrans discussions have become, when I asked Bratches about his biggest takeaway from this deal, retrans didn’t even come up. I’m told Disney and Time Warner Cable had heavy negotiations over price, but apparently, it was never a huge issue during this negotiation.
2. TV Everywhere is coming sooner than you think.
Bratches said he was most proud of deal terms that will allow Time Warner Cable to stream ESPN, ESPN2 and ESPNU — the full channels — to its broadband and mobile customers. I’m told ESPN’s two new sports tier channels — ESPN Goal Line and ESPN Buzzer Beater — also will be part of this deal.
This is part of something called TV Everywhere, a concept that cable operators have been pursuing for years that would allow their subscribers to watch channels on several different platforms. Time Warner has not said when it will roll out such a service, but sources expect to see something in the market by Christmas.
One hold-up in this process has been authentication. Time Warner Cable wants to make sure that such a service is available only to its video subscribers who also subscribe to broadband. The multisystem operator’s executives convinced ESPN that it will have an authentication system in place to ensure that such a process is seamless.
“Being in the room as the first authentication deal for linear networks was being signed was somewhat historic,” Bratches said.
Bratches told me that ESPN has all the necessary rights to allow cable operators to stream its channels — including live NFL and MLB games — in this manner. But sources said ESPN executives plan to visit NFL and MLB offices this month to answer questions over this part of the deal.
3. Sports tiers are getting rehabilitated.
Sports tiers have been one of the cable industry’s biggest disasters to date. Networks feel like sports tier carriage is akin to a death sentence because they attract so few subscribers.
This deal breathes new life into sports tiers and ensures that they won’t be going away. ESPN will launch the two NFL RedZone-style highlights channels on Time Warner’s sports tier: ESPN Goal Line for college football and ESPN Buzzer Beater for college basketball. It also will move ESPN Classic to Time Warner’s sports tier and will make some ESPN3 content available for it as well. ESPN also plans to put local content and ESPN Radio (both audio and, in some cases, video) on the sports tier.
All of a sudden, ESPN’s brand will be all over Time Warner’s sports tier, which should improve its penetration. Cable operators have done a miserable job marketing these tiers. It will be interesting to see whether ESPN’s marketing, and brand name, help.
“We made a commitment to help Time Warner strengthen sports tiers,” Bratches said. “That was important to Time Warner.”
Within hours of the deal being announced, Time Warner Cable authorized the new ESPN Goal Line for sports tiers across its entire footprint. Friends of mine who are Time Warner Cable subscribers raved about the channel over Labor Day weekend, using the same descriptions I’ve heard associated with the popular NFL RedZone, which also helps drive sports tier penetration.
Bratches said the channels will be available to other cable operators but only as part of a larger negotiation. “There’s an opportunity for others to have those channels,” he said, “but it’s not a one-off.”
4. MSOs will pay for (some) broadband content.
The growth of ESPN3 still amazes me. With the Time Warner deal, ESPN now has persuaded the country’s top six Internet service providers to pay for broadband content.
As little as two years ago, the thought that MSOs would pay anyone for broadband content was laughable. Now, it’s a reality.
Each of ESPN3’s deals is slightly different. Most ISPs pay ESPN a rate around 10 cents a broadband subscriber per month for access to ESPN3. The country’s biggest MSO, Comcast, pays a flat fee, as does Time Warner.
“If we can hit the sweet spot between launching products that support your brands and helping your affiliates grow their business, it’s a much easier conversation to have,” Bratches said.
John Ourand can be reached at firstname.lastname@example.org. Follow him on Twitter @Ourand_SBJ.