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Contract talks with Disney break down

By Joe Flint 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 27, 2019).

Dish Network Corp. has stopped carrying 22 regional sports networks owned by the Walt Disney Co. as negotiations over a new distribution contract broke down.

The channels, which went dark Friday morning on Dish and its direct-to-consumer streaming platform Sling, are the sports networks that Disney acquired in its $71.3 billion acquisition of the bulk of entertainment assets of 21st Century Fox earlier this year.

Disney is in the process of selling 21 of the regional sports networks to Sinclair Broadcast Group Inc. in a deal valued at more than $10 billion. The one other channel -- New York's YES Network, which carries Yankee baseball -- is being sold to group that includes the Yankees, Sinclair and Amazon.com Inc.

Disney retained an outside adviser to handle the negotiation of distribution fees paid by Dish for the sports networks' programming. A spokeswoman for the networks said an offer that would have retained the current terms in a new contract was rejected.

"The regional sports TV business model is broken," said Andy LeCuyer, Dish senior vice president of programming. "It relies on the majority of customers subsidizing the slim minority who actually watch these channels."

Sports channels "should be like a ticket to the ballpark," he said. "Fans who want to watch the game should be the ones who pay for it."

Typically regional sports networks are among the most expensive services for distributors to carry, with the cost then being passed on to customers. As consumers continue to abandon their pay-TV services in favor of lower-cost alternatives, distributors such as Dish have been pushing hard to lower programming costs.

In addition, while regional sports networks have hard-core fans, ratings in general for such services have waned in recent years. Furthermore, when the channels aren't carrying games, viewership becomes anemic.

The fight with the Fox Regional Sports Network, as they are known, is the latest of many for Dish over the past several years. It stopped carrying AT&T Inc.'s HBO and Cinemax channels in November, and prior to that it dropped and then restored many big networks including Fox Corp.'s Fox News, CBS Corp.'s CBS and AT&T's CNN. Earlier this year, it restored carriage of the Spanish language network Univision after a nine-month battle.

Dish's deals to carry the FX and National Geographic channels that Disney also acquired from 21st Century Fox are up as well. But they are still being carried, and a person close to the negotiations described the talks as productive.

The deal Dish has with Fox Corp. to carry its local TV stations and Fox Sports 1 also has expired; however, the two companies reached an agreement for a short-term extension.

Fox Corp. and Wall Street Journal parent News Corp share common ownership.

Dish isn't alone among distributors pushing back against programmers seeking rate increases at a time when cord-cutting by consumers continues to grow. Late last week, AT&T's DirecTV and U-Verse stopped carrying CBS -owned properties including its local TV stations in several of the nation's biggest markets.

AT&T is also in a fight with Nexstar Media Group Inc., one of the largest owners of local TV stations in the country. Nexstar stations went dark on AT&T platforms three weeks ago.

Write to Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

July 27, 2019 02:47 ET (06:47 GMT)

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