Online TV Confronts Rising Carriage Fees

When launched in 2015, online TV services such as Sling TV, PlayStation Vue and DirecTV Now were championed as pay-TV saviors in the face of Netflix, Amazon Prime Video and Hulu.

Now Vue is history, DirecTV Now has been rebranded AT&T TV and Sling remains stagnant with about 2.6 million subscribers. All the while, the carriage fees paid by distributors to content holders continue to rise, leading to programming blackouts for subscribers.

A carriage dispute is a disagreement over the right to “carry”, that is, retransmit, a broadcaster’s signal. Carriage disputes first occurred between broadcasters and cable companies and now include satellite and other multichannel video programming distributors such as online TV.

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Sports-themed fuboTV just announced it was dropping Disney-owned FX, FXX, FXM and National Geographic due to increased costs to carry the channels.

Disney reportedly is demanding $16 monthly in retransmission fees per subscriber to carry the combined channels, including ESPN — an amount deemed too expensive by fuboTV.

A fuboTV staffer recently went on Reddit to address the issue: “As many of you know, neither fuboTV nor any other distributor is able to license just ESPN from Disney; instead, distributors are required to license the ‘Disney bundle.’ There is no way around this. As such, we [opted] to make the difficult decision of building a channel lineup that is both differentiated and affordable to consumers.”

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The staffer contends the Disney bundle price would require fuboTV to revisit bundle pricing, i.e. raise prices.

“Additionally, it’d come with high penetration (user) requirements, which would limit our ability to offer a differentiated offer for different consumer cohorts,” the staffer wrote.

In a media statement, fuboTV said it has added dozens of entertainment networks to its base package, including channels from AMC Networks, WarnerMedia, Viacom and Discovery.

“fuboTV remains a leading platform for the best movies and TV shows across every genre — from comedy and drama to nature and reality — both live and on demand,” read the statement.

Last month, Sling TV raised its monthly subscription fees by $5 to $30 each for Sling Orange and Sling Blue to offset program distribution costs. A combined bundle fee costs $45 monthly.

“Sling doesn’t own the networks you watch — we have to pay programmers for their channels so that we can provide them to you, and the price of programming has been going up,” Warren Schlichting, president of the online service, wrote in a blog post. “Unfortunately, we have to share those rising prices with you, so we can continue to provide you with the same great experience you’ve come to expect from Sling.”

 

Comcast, Starz Ink New Carriage, Content Distribution Deal

Christmas came early for Starz, the Lionsgate-owned pay-TV and over-the-top video distributor.

Comcast Cable and Starz Dec. 23 announced they have entered into a long-term agreement for the continued carriage of the Starz networks on Xfinity TV as well as a new content deal between Lionsgate and NBCUniversal.

Financial terms of the agreement were not disclosed.

“We are pleased that we were able to extend the partnership to Peacock and other businesses within Comcast while also ensuring Xfinity customers continue to enjoy great Starz programming,” Dana Strong, president of consumer services for Comcast Cable, said in a statement.

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The companies announced that NBCUniversal will license content from Lionsgate for Peacock, its streaming service launching in April 2020. Peacock will have access to hundreds of feature films and shows from the Lionsgate catalog to stream alongside the previously announced slate of original series, TV shows, and films from Universal and other major studios.

NBCUniversal will also license content to Starz to be featured in the U.S. and on its international streaming service, StarzPlay, now available in 49 countries worldwide.

The new pact represents a lifeline of sorts for Starz as Comcast remains one of the premium channel’s largest domestic distributors. Comcast had previously said it would replace Starz with MGM’s Epix platform is no agreement was in place by Dec. 31.

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Under the new agreement, the Starz flagship premium channel, as well as the Starz Encore suite of channels — including Encore, Encore Westerns, Encore Black, and Encore Action — and related video on demand content will continue to be available to Xfinity customers with expanded distribution on the Comcast Flex platform and a path for an orderly transition to an à la carte business.

“We look forward to continuing our longstanding partnership with Comcast to deliver great content and great value to our customers,” said Starz CEO Jeffrey Hirsch. “Our ongoing relationship with Comcast reflects our ability to unlock opportunities across all of our businesses to the benefit of our subscribers.”

DOJ Drawn Into Comcast, Starz Carriage Dispute

With legacy pay-TV under siege from cord-cutting subscribers and high-profile alternatives such as Netflix, Amazon Prime Video, Hulu and now Apple TV+, the status quo for traditional carriage agreements has gone out the window.

And so it was that Comcast last month quietly announced it would soon end Xfinity subscriber access to Starz, the premium movie and TV service it acquired in 2016 for $4.4 billion.

The news was significant since Comcast represents about a third of Starz’ 24.4 million subscribers. Starz, which operates its own branded $8.99 monthly subscription streaming service, has been a profit vehicle for Santa Monica, Calif.-based Lionsgate.

Comcast reported it will replace Starz on Dec. 10  with Epix, the premium service owned by MGM and formerly Lionsgate, unless a new agreement can be reached. The news has contributed to a 9% drop in Lionsgate’s stock valuation — which is already down nearly 50% in the fiscal year.

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The negotiation impasse has reportedly caught the attention of the Department of Justice, which continues to have Comcast in its crosshairs ever since its acquisition of NBC Universal in 2009. Back then, regulators forced the cable giant to relinquish management input on its stake in Hulu, citing antitrust issues.

Earlier this year Comcast sold its Hulu stake to Disney after acquiring Sky satellite TV operator in the United Kingdom.

Comcast’s NBC Universal unit is readying its own SVOD service, Peacock, early next year.

The situation prompted Senators Dianne Feinstein (D-CA) and Susan Collins (R-ME) to contact Assistant Attorney General Makan Delrahim to investigate the situation. Delrahim played a significant role in the DOJ’s failed attempt to stop AT&T’s acquisition of Time Warner.

“These changes could lessen competition in the video programming market and limit choices for many thousands of consumers in Maine and millions more across the nation,” Collins wrote in a letter to Delrahim as reported by CNBC.

“I encourage both of you to seek a win-win solution and consider all options to keep Starz programming on the air,” Feinstein wrote in a separate letter.

Comcast is employing strategy out of Dish Networks’ playbook, which typically includes threats to halt access to third-party content distribution for more favorable distribution terms. Indeed, Dish currently has HBO blacked out to it subscribers.

Comcast, like Dish, contends its subs can access services such as Starz and HBO independently, thus negating what it considers to be excessive carriage fees.

“At the end of the day, this is a routine commercial negotiation that raises no conceivable antitrust concerns,” Comcast said in a statement.

Starz countered that Comcast is forcing its subs to pay more for its service.

“By unilaterally taking Starz out of its packages with no refund … Comcast is unfairly depriving them of relatable programming that reflects their cultural experience,” read a Starz statement.

Lionsgate reports third-quarter (ended Sept. 30) financial results Nov. 7.