Streaming takes center stage in Charter-Disney deal

Charter Communications' vision for a "hybrid" model for video that pairs traditional pay-TV packages with streaming services is taking form in a new distribution deal that puts an end to a high-profile carriage dispute with The Walt Disney Company.

In a new, multiyear agreement billed as "transformative" by Disney and Charter, the cable operator will now be in a position to bundle select direct-to-consumer (DTC) streaming services from Disney into certain pay-TV packages.

Among the prime examples, Disney+ Basic, the ad-supported tier of Disney+ that regularly sells for $7.99 per month, will be bundled in with Charter's Spectrum TV Select package as part of a new "wholesale agreement." That addition will arrive in the coming months.

ESPN+, a premium sports-focused streaming service, will also be provided to customers on Charter's Spectrum TV Select package.

Charter subs to get access to DTC form of ESPN

In another critical element of the new deal, the coming DTC version of the flagship ESPN service will be made available to Spectrum TV Select subs when it launches. Disney has not announced when the flagship ESPN service will be launched under the DTC model. But its future access to Charter video subs on certain packages is a big deal amid the wide belief that live sports (including networks such as ESPN) are the glue keeping the pay-TV business model from completely crumbling to the ground.

Charter will also sell Disney's DTC streaming services – including Disney+, Hulu's subscription VoD service, ESPN+ and Disney's discounted streaming bundle – to Charter's broadband-only customers at "retail rates." They did not announce how big a cut Charter will get from any new Disney DTC subs who come through the cable operator's distribution platform. But that piece enters the picture as Charter prepares for Xumo, the Comcast-Charter national streaming joint venture, to become its "go-to" platform for new video sales.

Update: Charter will also have the flexibility to offer a "range of video packages at varying price points based upon different customer viewing preferences." It was not immediately clear how much leeway Charter will gain in providing certain Disney channels in a package to video subs who do not want pricey sports channels such as ESPN. But Charter did note that Disney networks no longer tied to Spectrum TV video packages include Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo.

Charter and Disney have also "renewed their commitment to lead the industry in mitigating the effects of unauthorized password sharing." Disney is working on some new password-sharing policies that could see the light of day in 2024.

The attributes of the new Charter-Disney deal might serve as a blueprint of sorts as other operators negotiate new carriage deals with Disney.

Dispute neared the two-week mark

The new deal was announced nearly two weeks after about two dozen Disney channels – including ESPN, FX and ABC – went dark on Charter systems after the two sides failed to arrive to a new agreement or agree to extend existing terms while negotiations continued. Charter has been pointing video subs to streaming alternatives, such as Google's YouTube TV, to continue to get access to Disney-owned channels during the dispute. The new deal restores Charter's access to the Disney channels.

The deal also comes together amid Charter's declaration that the pay-TV model was broken and threatened that the operator was prepared to "move on" without Disney content on a permanent basis if both sides failed to reach a new deal quickly. Charter, an operator with more than 14 million video subs, was poised to lose about 1.2 million pay-TV subs if the carriage impasse did become permanent, according to New Street Research.

The agreement finalized just hours before ESPN broadcasts tonight's Monday Night Football matchup between the Buffalo Bills and New York Jets.

While there's no doubt that both sides would have to concede something in such an important negotiation, the announced terms of the deal seem to fit in with what Charter was seeking.

Charter CEO Chris Winfrey has been discussing a "better path" forward that involves a hybrid model combining traditional linear TV with newer DTC services. The aim, he said, is to help stabilize Charter's video business while also helping Disney retain its traditional pay-TV business and grow its streaming business incrementally.