As the carriage tug-of-war between Disney and YouTube TV threatens to keep ESPN’s live feed off the popular streaming platform for yet another weekend of football, Mouse House execs say that negotiations could go on “for a little while.”
Speaking to investors during the company’s year-end earnings call Thursday morning, Disney chief financial officer Hugh Johnston suggested that YouTube TV’s 10 million subscribers are unlikely to regain access to the ESPN brands in the near term. While Johnston issued the standard disclaimer about talking out of turn—“I’m not going to comment much on ongoing negotiations that are live right now”—his boss stated that the terms of Disney’s offer to Alphabet were in line with recent agreements the entertainment giant has reached with other pay-TV operators.
“The deal that we have proposed is equal to or better than what other large distributors have already agreed to,” Disney CEO Bob Iger said at the end of the call. “We’re not trying to really break any new ground.”
Iger went on to note that while Disney “care[s] deeply about our consumer” and its highest priority is “to close a deal on a timely basis so that interruption does not occur,” the affiliate team isn’t about to cut a deal that isn’t commensurate with the value of ESPN/ABC.
“We’re trying really hard, [and] working tirelessly to close this deal,” Iger said. “We’re hopeful that we’ll be able to do so on a timely enough basis.”
ESPN and its siblings have been dark on YouTube TV since Oct. 30, an impasse that has prevented subscribers from plugging into the last two weeks of Monday Night Football and Disney’s robust slate. And while the stalemate has prompted FCC chair Brendan Carr to fling a few lightning bolts from his X account (“Google and Disney need to get a deal done and end this blackout. People should have the right to watch the programming they paid for—including football. Get it done!”), the numbers aren’t shaking out in consumers’ favor.
For one thing, YouTube TV’s financials are effectively a rounding error chez Alphabet, which boasts a market cap of $3.38 trillion. For what it’s worth, Alphabet’s valuation outstrips the GDP of every country on the face of the earth but for six (the U.S., China, Germany, Japan, India and the UK), so a slew of $20 credits isn’t going to break the bank in Mountain View. Disney may not be in the same rare air as Google’s parent company, but with a $191.88 billion cap, it remains one of the 100 most powerful entities on the market.
The sports unit is one of Disney’s top earners, generating $17.7 billion in revenue for FY 2025, and with operating income up 20% to $2.88 billion, the ESPN business accounted for nearly a fifth (19%) of the company’s total annual haul. Domestic revenue at ESPN grew 5% to $16.1 billion, as affiliate revenue ticked up 1% to $10.8 billion and ad sales grew 14% to $4.27 billion.
In a sense, the happy financial returns provide both combatants with what amounts to Broncos-grade pass protection; while the pressure to get a deal off is steady, all that money can buy the sort of O-line that allows for a more contemplative read of the market.
And Disney may have been provided with further incentive to stand its ground earlier this week, when an unsightly Eagles-Packers game outkicked its coverage in front of 20.6 million Monday Night Football viewers. The 10-7 Eagles victory delivered the largest Week 10 audience for the primetime showcase since 2000, and while the clash between the Super Bowl champs and a hugely popular Green Bay squad was one of the most anticipated pairings of the season, the battle of irresistible force and immovable object (Philly clung to a 3-0 lead heading into the fourth quarter) failed to provide the sort of offensive fireworks that are usually associated with big ratings deliveries.
The turnout for Monday’s defensive struggle marked a significant improvement compared to the previous week’s game, which featured a 27-17 Cardinals win over the Cowboys. With an average draw of 16.2 million viewers, deliveries were down 22% versus the year-ago Bucs-Chiefs game (20.7 million), leading some observers to speculate that the slippage was, at least in some respects, a function of the YouTube TV blackout. Assigning causality in such cases is like trying to force a freshly-shucked oyster into the coin slot of a parking meter, and nearly as ridiculous.
For whatever it’s worth, ABC’s Saturday Night Football put up its usual gaudy numbers last week, as LSU-Alabama beat all college football comers with 7.54 million viewers. And while that was a big step up from the Nov. 1 Oklahoma-Tennessee showcase (4.81 million), such comps are largely meaningless, given that ABC’s broadcast went head-to-head with Fox’s presentation of Game 7 of the World Series, which gobbled up 27.3 million fans. While the earlier caution about bivalves and municipal traffic management still applies, it’s probably safe to venture that the all-or-nothing Jays-Dodgers clash was going to steal share from college football, regardless of whatever happened to be going on in the YouTube TV universe.
Since carriage negotiations are conducted under MI6 levels of secrecy, it’s not surprising that few details about the talks have leaked. ESPN chair Jimmy Pitaro is among the handful of Disney higher-ups at the table, and Iger is said to have opened a back channel to Google CEO Sundar Pichai. And while this particular standoff has been unusually drawn out, the sticking points wouldn’t be unfamiliar to anyone who’s participated in one of the hundreds of similar scrums that have taken place since the dawn of the cable bundle. Disney wants to bump its fee of however-many dollars per sub, while YouTube TV would just as soon cough up an amount below Disney’s asking price.
As much as distributors have balked at Disney’s practice of bundling its entertainment channels with the high-profile sports networks, there is nothing novel about stuffing bready filler in with the protein. If Disney didn’t turducken the likes of FX and Freeform in with ESPN and ABC, the demand for the former pair would be negligible. Per Nielsen, FX last week averaged 145,000 viewers, of whom just 31,000 were members of the adults 18-49 demo—a far cry from the numbers ESPN put up during the same span (1.66 million total viewers and 637,000 adults under 50).
For all the wrangling that gets done during these distribution clashes, Disney and its peers face a full-time job in trying to offset the ravages of cord-cutting with streaming additions. In the form 10-K issued Wednesday morning, Disney reported that ESPN’s reach has been whittled down to 61 million subscribers, down 8% from the year-ago 66 million and off nearly 40% from its 2011 peak (101.1 million).
Eventually, a deal will get done, but the reality is that there’s little incentive for either party to cave. All the sentiment surveys in the world aren’t going to make Disney budge—which makes a lot of sense, given the inherent uselessness of such temperature-taking measures—and until there’s sufficient evidence to suggest that the hemorrhaging of subscribers/dollars has become unmanageable, there’s no sense in projecting when everyone will finally make nice.
On Sunday, a Morgan Stanley report suggested that Disney would lose as much as $30 million a week during the blackout, and while Johnston did not explicitly acknowledge the report, he confirmed that his team has modeled the potential impact of a long-term blackout into its projections.
“The only thing I would say is, in terms of our guidance we built a hedge into that with the expectation that these discussions could go for a little while,” Johnston said. For his part, Iger said that while Disney has “been working tirelessly to close this deal and restore our channels,” no paper will be signed until Alphabet acquiesces.
“It’s imperative that we make sure that we agree to a deal that reflects the value we deliver,” Iger said. “Which, by the way, both YouTube and Alphabet have told us is greater than the value of any other provider.”
In the meantime, perhaps now is the time for YouTube TV customers to find something better to do with their Monday nights. Next up for the MNF crew is Dallas (3-5-1) at Vegas (2-7).