Verizon, Disney Avert Bowl-Day Blackout With Contract Accord

December 31, 2018 Updated: December 31, 2018

College football won’t go dark on New Year’s Day.

Millions of TV customers from Boston to Washington were spared the loss of channels such as ESPN—and popular college football games —after Verizon Communications Inc. and Walt Disney Co. struck a distribution agreement on the eve of the new year.

The companies reached a broad-based, multiyear agreement, with details to be released in soon, Verizon spokeswoman Adria Tomaszewski said Dec. 30.

The agreement, if finalized, shows that pay-TV operators are still willing to pay for pricey sports channels even in an age of video streaming and declining viewership. Disney was able to win price increases for its programming and the pickup of a new channel, the ACC Network, according to people familiar with the talks who asked not to be identified.

The negotiations were seen as a litmus test of the business model that’s fueled Disney’s profit for years: charging ever-higher fees for ESPN even though many consumers don’t watch sports, and using the network’s popularity to force pay-TV providers to carry other programming.

The Dispute

A contract between Verizon, which serves some 4.6 million customers under the Fios brand, and Disney, a major TV network owner, was set to expire at 5 p.m. New York time Dec. 31. Disney had run ads on its channels warning viewers—including ABC audiences in New York and Philadelphia—that they might lose access and should contact Verizon to complain.

Verizon had countered in a statement that Disney was seeking hundreds of millions of dollars more for programming even though the company’s channels are losing viewers. Disney was also asking Verizon to pay for the ACC Network sports channel, due to start service in August. That network will carry events from the 15-member Atlantic Coast Conference, which doesn’t include any schools from New York City, Philadelphia, or Washington.

At risk in the dispute were five college football games on New Year’s Day set to air on Disney-owned networks, including the Rose Bowl on ESPN. Also in jeopardy was ABC’s long-running “Dick Clark’s New Year’s Rockin’ Eve,” hosted by Ryan Seacrest.

Pay-TV Pressures

Such fee disputes have become more common as the arrival of new viewing options like Netflix Inc. and a drop in pay-TV subscriptions have increased pressure on all of the parties to obtain the best possible deal.

The number of pay-TV subscribers who get ESPN fell 2.3 percent to 86 million last year. Less-popular Disney-owned channels, such as the SEC Network and ESPN News, experienced even greater declines.

But ESPN ranked as the top cable network among men and No. 2 among all viewers (after Fox News), according to Nielsen’s rankings, and its programs accounted for 42 of the top 100 cable broadcasts this year.

Disney has said fewer customers are cutting the cord with the advent of new, lower-cost cable packages. Still, the company is spending heavily on sports rights and new programming, both for its traditional channels and new streaming services it is rolling out.

In May, for example, the company acquired the rights to UFC mixed-martial-arts matches, which will be split between ESPN and ESPN+, the company’s $5-a-month streaming service. That five-year deal, which starts in January, cost a reported $1.5 billion.

By Christopher Palmeri & Scott Moritz

From Bloomberg