Standoff

It’s two weeks into the YouTube TV blackout of Disney networks — including ESPN and ABC — and the Mouse House’s top brass say they’re hunkering down to fight for as long as it takes to reach terms that are acceptable to the media company.

Disney CEO Bob Iger, speaking on the company’s September quarter earnings call, said, “We care deeply about our consumer and our priority has always been to remain on their service without interruption, to close a deal on a timely basis so that interruption does not occur. The deal that we have proposed is equal to or better than what other large distributors have already agreed to. So we’re not trying to really break any new ground, and while we’ve been working tirelessly to close this deal and restore our channel to the platform. It’s also imperative that we make sure that we agree to a deal that reflects the value that we deliver, which both YouTube, by the way, and Alphabet, have told us, is greater than the value of any other provider.”

Iger continued, “So we’re not trying to break new ground. The offer that’s on the table is commensurate with deals that we’ve already struck with, actually distributors that are larger than they are. We’re trying really hard, as I said, working tirelessly to close this deal, and we’re hope, we were hopeful that we’ll be able to do so on a timely enough basis to at least give consumers the opportunity to access our content over their platform.”

Disney CFO Hugh Johnston, in an interview with CNBC earlier Thursday, took a more adversarial stance. “Obviously, as we entered the year, we knew this was going to be a challenging battle and we prepared ourselves for it, and we’re ready to go as long as they want to,” he said.

On the company’s earnings call, Johnston didn’t provide much additional insight into when there might be a deal reached on a YouTube TV renewal. “Obviously, I’m not going to comment much on ongoing negotiations that are live right now. The only thing I would say is, in terms of our guidance, we built a hedge into that with the expectation that that these discussions could go for a little while,” he told analysts.

Johnston added that in terms of “the dollar impact” on Disney’s bottom line, he said: “Keep in mind, there’s two pieces to it. There’s the piece that we’re not getting paid for [from YouTube], and then the piece that we’re picking up by virtue of subscribers moving elsewhere. But beyond that, I don’t want to comment because it is a live negotiation right now.” This week Disney extended Johnston’s employment agreement through 2029.

Such carriage fights are not uncommon in the pay-TV business. But Google and Disney have gone into this dispute deeply entrenched in their positions, and still don’t seem to be very close to a resolution. Disney’s networks went dark on YouTube TV service just before midnight ET on Thursday, Oct. 30, after Disney and Google were far apart on a deal before the expiration of the previous contract.

As is almost always the case, the companies are fighting over price. Google says Disney is asking for an unprecedented fee hike in order to “reset” the market and be able to charge other distributors the same high rates. Disney has countered that Google is “refusing to pay fair rates for our channels.”

The economic pain is likely setting in for both sides. Disney is losing an estimated $30 million per week in revenue because of the YouTube TV blackout, Morgan Stanley has estimated, and the loss of viewers on the platform appears to be cutting into Disney’s TV ratings. Meanwhile, Google is clearly facing a rising tide of irate YouTube TV subscribers, which will only grow the longer the standoff continues.

YouTube TV customers have already missed two straight weeks of “Monday Night Football” on ESPN and ABC (Philadelphia Eagles vs. Green Bay Packers on Nov. 10 and Arizona Cardinals at Dallas Cowboys on Nov. 3), not to mention two Saturdays of college football and other sports, plus ABC primetime shows and more.

This past Sunday, YouTube TV began alerting subscribers about how to manually apply a one-time $20 credit to their account because of the Disney carriage dispute, a move to try to mitigate cancellations.