Six months in the making, Comcast and The
Walt Disney Co. have inked a comprehensive, 10-year carriage
deal that may serve as a template for the multichannel industry
and its evolving TV Everywhere
platform into
the next decade.
The new agreement
— negotiations for
which began in June
and were finalized on
Dec. 29 — encompasses
25 Disney-owned
networks and more
than 70 services. Financial
terms were not
disclosed, although
various new license
fees will be phased in
over the length of the
contract.
In many ways, the
pact accelerates the
TV Everywhere initiative
for the entire cable
business, giving authenticated
subscribers
at the nation’s largest
pay TV distributor access
to programming
through computers,
tablets and smart phones. The model underlines the value
of subscribing to cable as more appealing than programming
accessible online from nonlinear providers such as Netflix,
Amazon, Hulu or Apple’s iTunes Store.
Comcast’s Xfinity TV customers will join those of Time
Warner Cable, Bright House Networks and Verizon Communications’
FiOS TV in being able to view ESPN online
and on tablets on an authenticated basis. Comcast subscribers,
though, will become the first in the nation to have access
to content on products similar to WatchESPN for ABC,
Disney Channel, ABC Family and Disney XD.
The agreement also encompasses linear and on-demand
content from ABC Family, Disney Channel, Disney XD, Disney
Jr., ESPN2, ESPNU, ESPN Deportes, ESPNEWS, ESPN
Classic, ESPN Goal Line, ESPN Buzzer Beater, ESPN 3D, ESPN
GamePlan, ESPN FullCourt and ESPN3. It includes retransmission-
consent for seven ABC-owned broadcast-television
stations (WABC-TV New York; WLS-TV Chicago; WPVI-TV
Philadelphia; KGO-TV San Francisco; KTRK-TV Houston;
KTVD-TV Raleigh-Durham, N.C.; and KFSN-TV Fresno,
Calif.), as well as more than 10 high-definition networks.
The scope of the deal is “unprecedented in the history of
our industry,” executive vice president of content acquisition
Greg Rigdon, who headed Comcast’s negotiating team, said.
“We’re very excited about the linear and on-demand aspects.
We’ve already done a lot of work with TV Everywhere and will
continue to look to gain more rights. But this is the lynchpin
of taking TV Everywhere to the next level.”
‘UNPRECEDENTED’ DEAL
Dave Preshlack, executive vice president of affiliate sales and
marketing at Disney & ESPN Networks Group, said the farreaching
agreement underscores the value and viability of
the multichannel subscription model going forward. “This is
certainly not your affiliate deal of the past,” he said. “I’ve never
been involved with something as expansive. It’s the most comprehensive
deal in the history of the industry.”
It was one born from discussions surrounding a quartet of
cable networks whose license fees were scheduled to expire at
the end of 2011: Disney Channel, ABC Family, Disney XD and
SoapNet, which will soon morph into Disney Junior.
“That represented a great opportunity for
us to sit down and talk about how to make the
content as valuable as possible for us, Comcast,
its customers and our fans/viewers,”
Preschlack, whose team decamped in the cable
company’s home market of Philadelphia
during the final weeks of negotiations, said.
“There are so many things going on in the industry.
We’re very happy to have worked this
out in the board room and not in public.”
Preschlack didn’t offer specifics about
launch dates, but noted that “we’re looking to
activate products sooner, rather than later.”
To that end, he said college-basketball scoring/
highlight service ESPN Buzzer Beater
could tip off on Comcast systems before the
conclusion of this season.
One thing the pact doesn’t cover is the
Longhorn Network. “It didn’t make it into
this deal,” Preschlack said, adding that talks
continue with Comcast and other distributors
about the regional sports service dedicated
to University of Texas athletics.
Comcast has committed to preschool net
Disney Junior, but Preschlack emphasized
it is not launching next month, as has been
reported.
Relative to the rollout of streaming products like Watch Disney
Channel and Watch Disney XD, Preschlack said “we’re
talking months, not years,” before providing a bit of a history
lesson. After signing its comprehensive carriage deal
with Time Warner Cable in September of 2010, WatchESPN
debuted on computers before emerging on other platforms.
“It takes time to get it right,” said Preschlack.
He also said Watch ABC is in the works and it will afford
“windows that advantage Comcast subscribers.” By the
same token, he said Disney would remain “consistent” with
its covenants involving online service Hulu. (Disney coowns
the streaming-video service, along with News Corp.,
NBCUniversal and Providence Equity Partners.)
In the meantime, he said Disney/ESPN is actively eyeing the
content/technological landscape. “There are a lot more opportunities
with other distributors out there,” said Preschlack.
COST CERTAINTY FOR COMCAST
Comcast’s Rigdon also believes this kind of comprehensive
deals will likely serve as model for the future. “Consumers
want access to great content on whatever devices and we want
to provide that for them,” he said, noting that the deal’s length
locks in measures of cost certainty.
Comcast vice chairman and chief financial officer Michael
Angelakis, speaking at the Citigroup Global Entertainment
Media & Telecommunications conference
in San Francisco on Jan. 5, made similar remarks.
Calling the deal very broad, he noted
this “really is about how we use the Disney
suite of services over many platforms. It’s really
where we are … Long-term deals provide
some consistency and control so we know
how to manage the business better. These
are very long, complex deals.”
Neither side would discuss pricing, but that
didn’t stop the financial community from trying
to nail down specifics in the far-reaching
pact.
“We expect Comcast to pay $39 million
in Disney retransmission fees for its stations
in 2012, and another $1.85 billion for
Disney cable networks,” Miller Tabak analyst
David Joyce wrote in a recent research
note, compared to an estimated $3.57 billion
when the deal ends in 2021. He expects
that overall, Comcast’s total programming
expense to increase at an 8% compound rate
for the next five years.
In the Disney deal, Joyce forecast that the
retransmission-consent payment for WABC
in New York would almost double from 65
cents per subscriber, per month in 2012 to $1.25 per sub, per
month in 2021. The monthly cost of the ESPN networks will
rise from $5.05 in 2012 to $9.68 in 2021, according to Joyce estimates,
while Disney Channel will rise from $1.22 to $2.34
and ABC Family to 59 cents from 31 cents.
