By Phillip Swann
The TV Answer Man – @tvanswerman

Charter, the corporate parent of Spectrum TV, said today that the pay TV economic model is “broken” but Disney has rebuffed proposals to offer a new way to provide less expensive programming packages to cord cutters who are opting to subscribe to streaming services. Consequently, Charter says, the two companies could not agree to a new carriage pact last night, triggering Disney to force the removal of its 26 channels, including ESPN and ABC-owned affiliates in select markets.

In a webcast today, the cable TV operator said Disney wants to maintain the current traditional pay TV model which would include ESPN and other Disney-owned channels in the all programming bundles regardless of whether subscribers want them. This would ensure that Disney would receive more in carriage fees because programmers are paid by the number of subscribers who have access to their channels. However, Charter contends that continuing that economic model will ultimately lead to a rapid end of the pay TV business. If pay TV services don’t give consumers cheaper options, which would not include high-priced channels such as ESPN in some bundles, millions more will cut the cord and opt for streaming.

“Disney’s traditional approach would result in a dramatic increase of cost to consumers – many of whom don’t view, want or even subscribe to Disney/ESPN content,” Charter says in the webcast presentation. “Charter offered to accept Disney ‘market’ rate increases in exchange for bundling ad-supported DTC (direct-to-consumer) apps with packaged linear products, and lower penetration payment minimums to provide packaging flexibility to customers. Charter has also offered to market the Disney DTC apps to its broadband customers. Disney declined. Charter also offered a shorter extension of the current contract to further discuss the benefits of Charter’s proposal, which Disney declined.”

Disney thus far isn’t buying the argument. “Disney Entertainment has successful deals in place with pay TV providers of all types and sizes across the country, and the rates and terms we are seeking in this renewal are driven by the marketplace,” Disney said in a statement. “We’re committed to reaching a mutually agreed upon resolution with Charter and we urge them to work with us to minimize the disruption to their customers.”

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— Phillip Swann