Published On: Fri, Oct 6th, 2017

A Good Day for ESPN After Disney Reaches Altice Agreement

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An ESPN operation room at Wimbledon in 2015. Under a new contract, the Altice USA cable service would pay more for ESPN, which is already the most expensive basic cable channel.

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Carl Court/Getty Images

Score one, finally, for ESPN.

After a long run of negative headlines, ESPN drew cheers from Wall Street on Monday with a tentative contract agreement between ESPN’s corporate owner, the Walt Disney Company, and Altice USA, which provides cable service to roughly three million homes in the New York City suburbs. Once the multiyear contract is made final, Altice will pay more to carry ESPN and other Disney-owned networks, including ABC, despite declines in their ratings.

ESPN is already the most expensive basic cable channel, costing distributors about $7.54 a month per subscriber home, according to SNL Kagan, a consulting firm.

“A very bullish sign for Disney” was how the longtime media analyst Michael Nathanson described the payment increases in a research note on Monday. He saw the deal as a step toward changing “the highly negative narrative that has enveloped” ESPN for much of the last two years, as the sports television giant has endured subscriber losses known as cord cutting. The previous contract covered seven years.

Benjamin Swinburne, an analyst at Morgan Stanley, said the renewal “shows that, despite the rapid and even accelerating pace of change in the TV business, there continues to be pricing power for certain network groups.”

Disney shares increased $1.29 on Monday, to $99.86.

What kind of price increases Disney secured for ESPN and ABC is unknown. (UBS estimated that the payment for ABC “doubled.”) Altice also agreed to distribute Disney’s SEC Network, which features games from universities in the Southeastern Conference, and the soon-to-be-introduced ACC Network, built around the Atlantic Coast Conference.

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At the same time, Altice won concessions from Disney, including more robust video-on-demand offerings and the ability to drop a little-watched ESPN spinoff channel. Shares of Altice, part of a European conglomerate, climbed 22 cents, to $27.53.

Disney had threatened to pull its channels if Altice did not agree to improved terms, potentially leaving viewers unable to watch “Monday Night Football” and a New York Yankees playoff game on Tuesday.

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