NEW YORK, Sept 1 (Reuters) – Shares of several U.S. entertainment companies including Fox Corp (FOXA.O) and Warner Brothers Discovery Inc (WBD.O) were dragged down on Friday by a dispute between media heavyweight Disney (DIS.N) and cable provider Charter Communications (CHTR.O) over television distribution fees.
Disney on Thursday night blocked its cable channels, including ESPN and ABC, from being shown on Charter’s Spectrum network after the two companies failed to secure a distribution agreement. Spectrum is the second largest U.S. cable provider, serving 14.7 million homes across large markets such as New York and Los Angeles.
The dispute soured investor sentiment on the sector, which has also been grappling with the Hollywood writers and actors strike over wages and other issues which have raised doubts about whether companies will have enough content in coming months.
Shares of Disney dropped 2.65% to a three-year low while Charter lost 3.4%. Warner Brothers Discovery Inc (WBD.O) fell 10%, Fox Corp (FOXA.O) shed 6%, Paramount Global (PARA.O) dropped 8%, while Comcast Corp (CMCSA.O), the largest U.S. cable provider, was down nearly 3%.
“The drop in Disney this morning looks to be tied to the company’s ongoing contract negotiations with Charter Communications,” said Art Hogan, chief market strategist at B Riley Wealth. “Another source of concern sits with the ongoing strikes with both actors and writers in Hollywood.”
Charter said Disney rejected its proposal for a new distribution deal that takes into account the rise of competing low-cost streaming services, which has fueled cord-cutting among its customers. The cable provider said it pays Disney $2.2 billion in annual programming costs, excluding advertising.
“Disney – so far – has insisted on a traditional long-term deal with higher rates and limited packaging flexibility,” Charter said in a presentation published on Friday.
Disney said on Thursday it has reached successful deals with pay TV providers across the country and that the rates and terms it sought with Charter “are driven by the marketplace.”
“This Charter-Disney deal not going through here has spooked a little bit of the market, at least that sector,” said Dennis Dick, market structure analyst at Triple D Trading.
Reporting by Chibuike Oguh in New York and Bansari Mayur Kamdar in Bengaluru; additional reporting by Amruta Khandeka and Khushi Singh in Bengaluru; editing by Michelle Price and Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
Chibuike reports on mostly large U.S.-based private equity firms, including Blackstone, KKR, Carlyle, and Apollo. He previously worked at Bloomberg News, and holds master’s degrees in journalism from New York University and Edinburgh Napier University.
Bansari reports on the global financial markets and writes Reuters’ daily flagship market reports on equities, bonds and currencies. An economist by training and winner of the Arthur MacEwan Award for Excellence in Political Economy, she has written for renowned global papers and magazines including The Diplomat, Boston Globe, Conversation, Huffington Post and more.