Affiliate fees and Disney
Pay-TV companies like Dish Network (DISH) pay carriage or affiliate fees on a per subscriber basis to media companies like The Walt Disney Company (DIS) for carrying their television networks. Usually, such affiliate fee agreements are multiyear agreements and come up for renewal at the end of their expiry date.
Traditionally, Disney’s ESPN has always been perceived as an expensive network. According to analyst estimates, ESPN is likely to have a carriage fee ranging between $7 and $8. Considering the high carriage fees for the network, ESPN is an expensive network for pay-TV operators looking to offer lower-priced skinny bundles to its viewers.
Disney was asked at its fiscal 3Q17 earnings call whether it expected ESPN’s direct-to-consumer service would affect its affiliate fee agreements with pay-TV operators. The company, while refusing to comment on ESPN’s carriage fees, stated that it believed in the strength of the ESPN brand. Disney also said that it believed ESPN broadcasts of major sports events continue to be popular among viewers.
The company further pointed out that the launch of ESPN’s direct-to-consumer service was a proactive move to counter the changing landscape of the media industry where the streaming of live sports is becoming increasingly popular among viewers.
Time Warner also optimistic about its affiliate fees
Time Warner (TWX) is another company that is optimistic about the growth of its affiliate fees. The company expects that its Turner business will have affiliate fee growth in the double digits. A major reason why Time Warner is upbeat about its affiliate fees is that it believes its Turner network brands provide better value than the Walt Disney Company’s (DIS) ESPN. In addition, the company is also open to content distribution on a wide variety of platforms including video on demand, and as a result, expects that its affiliate fees will match these distribution rights.