With Disney deal, Comcast takes long view on viewers' habits

The Comcast-Disney contract expands the reach of the ESPN sports network. This football panel comprised (from left) Lowell Galindo, Robert Smith, Urban Meyer, and Tom Luginbill.
The Comcast-Disney contract expands the reach of the ESPN sports network. This football panel comprised (from left) Lowell Galindo, Robert Smith, Urban Meyer, and Tom Luginbill. (JEFF SINER / Charlotte Observer)
Posted: January 08, 2012

Comcast Corp. executives see the TV audience fragmenting into a million pieces of glass with smartphones, laptops, desktops, and tablets.

Nonetheless, the Philadelphia company placed a big bet that the cable TV business will be here for many years, with a sweeping new 10-year contract with the Walt Disney Co.

The most extensive and largest content deal in Disney's history, the contract expands the reach of ESPN, the all-sports network, while also underpinning "the core fundamentals of the cable TV business," Sean Bratches, executive vice president with the Disney and ESPN networks, said Friday.

Comcast says it believes the arrangement could be a model for the industry and will be a good deal for its Xfinity TV consumers, offering more Disney content than any other pay-TV provider.

A critical component was a suite of services that will enable Xfinity subscribers to view Disney entertainment and ESPN sports on mobile devices and desktop computers. Disney has branded the services with the "Watch" logo - as in WatchESPN, WatchDisneyChannel, and WatchABC.

Inside the home, Xfinity subscribers can use a desktop, laptop, or tablet.

Comcast does not operate a wireless network outside the home, but it has wired 20,000 separate WiFi hot spots between Wilmington, Philadelphia, and New York City for free use by those who authenticate that they are Xfinity subscribers. A Comcast user also could access ESPN or Disney content through a Verizon or AT&T Wireless phone service, again after authenticating they are Xfinity subscribers.

WatchESPN should be available to Comcast's Xfinity subscribers within the next several months. WatchDisneyChannel is a new and similar service being launched later this year. Xfinity customers are expected to be the first to get it. It has not been determined when WatchABC will be ready.

"The Comcast goal is to be the customer's go-to source for video content, no matter how they want to consume it," James Ratcliffe, an analyst with Barclays Capital in New York, said Friday. "The deal gives them almost universal access to the Disney content over a variety of platforms."

The Mickey Mouse content will not be cheap. David Joyce of Miller Tabak & Co. L.L.C. estimates that Comcast could pay Disney more than $26 billion over the term of the contract.

The fees for individual Disney-owned cable channels will increase on average about 90 percent over the 10-year period. For example, the fee for the Disney-owned ESPN channel will increase to about $10 per month in 2021 from the current $5.05 per month, Joyce said.

The individual charges for hundreds of cable channels comprise the cable bill. Comcast subscribers currently pay an average of $73 a month for cable TV, which does not include charges for Internet or phone services in the triple bundle. The Comcast/Disney deal seems to suggest that the entertainment and news segment of the cable TV bill could double over the next decade.

Besides mobile capability, Ratcliffe said the deal bolsters Comcast's competitive position when compared with Internet providers Netflix or Hulu because of the heaping smorgasbord of Disney, ABC, and ESPN content. "Comcast will have what everybody else has, and they will have a lot of what others will not," Ratcliffe said.

There will be no reason for a Comcast subscriber to bolt to Hulu for an ABC show because it is not on Xfinity, Ratcliffe said.

As part of the contract, Disney also is expected to create a protected window for ABC content that gives Xfinity subscribers advantaged access to ABC programs. The contract boosts Disney's On Demand offerings, which will be refreshed monthly.

One theme in the TV business in recent years has been the growing popularity of devices other than the TV. Deloitte's annual State of the Media Democracy survey, released last week, reported that only 69 percent of respondents said the TV was their favorite device to watch a movie in 2011, down sharply from 93 percent in 2008. Streaming video is booming, and smartphone ownership is soaring.

Joyce, of Miller Tabak, said he believed these additional services in the Comcast/Disney contract are "a way to preserve the evolving TV ecosystem, and should help retain pay-TV subscribers."

Marcien Jenckes, senior vice president and general manager of video services at Comcast, said the Comcast/Disney contract could be a model for the industry and "allows us to offer most content in the industry at compelling prices." Said Jenckes: "The landscape of media consumption is definitely changing."

Contact staff writer Bob Fernandez at 215-854-5897 or bob.fernandez@phillynews.com.

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