Charter Communications, Inc. CHTR 1.38% is reportedly offering a new sports-free cable TV bundle for $19.95 per month. The bundle is called Spectrum TV Stream, and it excludes Walt Disney Co DIS 0.25%’s ESPN. While Charter has had a similar offer in the table since 2015, Disney investors should be watching to see just how Charter handles its new offering, according to UBS analyst Doug Mitchelson.
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In a new report, Mitchelson says Charter has offered a similar bundle since 2015. UBS estimates that Charter could shift as many as 1 million customers to its Stream service before it begins running into issues with its contractual obligations to ESPN. As it stands, ESPN is part of a $12 per month Sports and News Tier upgrade.
Disney investors should understand three critical points about Stream, Mitchelson says:
- The offering is simply a trial run as of now.
- The offer is not a virtual MVPD service and is therefore limited by minimum penetration contracts.
- The offer is not being advertised on Charter’s website.
“We believe this ‘update’ underscores the relevance of the upcoming DIS distribution renewal cycle, where ESPN’s min guarantee level (80%-85%) will be a material point of contention (DIS wants to move it back higher),” Mitchelson wrote last week (check out Mitchelson’s track record here).
But while investors believe Disney is losing negotiating leverage with distributors, UBS believes…
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