YouTube TV removed and then restored programming from The Walt Disney Company (DIS) over the weekend after the two sides failed to reach an agreement to resolve a carriage dispute by the contract deadline. The platform owned by Alphabet Inc. (GOOGL) blacked out programming from Disney's roster of networks and live channels from its platform at 11:59 p.m. on Dec. 17, 2021—the deadline for renewing its carriage agreement with Disney. After agreeing to the terms of a renewal, it began restoring access on Dec. 19, 2021.
"We have already started to restore access to Disney networks like ESPN and FX, including their live and on-demand content, as well as any recordings that were previously in your Library," the company told viewers of its YouTube TV platform on Sunday. "We will also be turning on the local ABC stations over the course of the day."
Disney said that it was "pleased" to reach a new distribution agreement with Youtube TV. "We appreciate Google's collaboration to reach fair terms that are consistent with the market, and we're thrilled that our robust lineup of live sports and news plus kids, family and general entertainment programming is in the process of being restored to YouTube TV subscribers across the country," the company stated.
- Disney programming was briefly unavailable on YouTube TV after the two sides failed to resolve a dispute over carriage fees by the contract deadline.
- The brief disruption turned out to be profitable for YouTube TV viewers because the platform offered them a $15 credit for the latest billing cycle.
- An agreement broadens the reach of Disney networks across streaming platforms.
Among the Disney networks that were blacked out from YouTube TV are FX and National Geographic. Live TV from ABC and ESPN also became casualties of the blackout.
The brief disruption of Disney networks turned out to be profitable for YouTube TV subscribers. YouTube TV had said that it was reducing its fees from $64.99 to $49.99 and applied the change as a $15 credit in the next billing cycle to some YouTube TV subscribers. The company said that it would maintain the credit for this month for the affected members.
A Dispute Over Carriage Fees
The two sides were in negotiations to hash out an agreement over Disney content that includes 17 live channels and eight television stations. YouTube claimed that Disney was demanding more money for its programming than what other platforms, which are similar in size to YouTube, pay for it. The contractual clause is known as the Most Favored Nation (MFN) clause and requires Disney to match its carriage rates across the board for services of similar size. Disney resisted the change, countering that YouTube was declining to reach a "fair deal" based on "market terms and conditions." The companies did not disclose terms of the new deal.
The dispute highlights the increasing acrimony between programming networks and platforms over carriage fees at a time when viewers are defecting from the cable bundle of expensive channels to streaming options. YouTube TV was involved in a similar dispute with NBC, which is owned by Comcast Corporation (CMCSA), in October 2021 before the two sides reached an agreement to keep more than 14 NBC-owned channels on the platform. Disney had played hardball with Dish Network Corporation (DISH) in 2019 before agreeing to renew carriage for FX and National Geographic, two channels it acquired that year.
Disney's Streaming Gains
The deal keeps intact Disney's pivot to becoming a major streaming player by broadening the reach of its networks on over-the-air (OTA) platforms. In its blogpost announcing the dispute, YouTube TV redirected viewers to the Disney Bundle—a $13.99-per-month standalone service that includes Disney Plus, Hulu, and ESPN+.
Disney-owned Hulu is also one of the biggest Multichannel Video on Demand (MVOD) platforms—a category that encompasses Live TV and Video on Demand. (YouTube TV leads the pack with slightly over 4 million subscribers.)
While ESPN+ does not carry much live sports, Hulu's Live TV broadcasts ESPN linear feed network offerings. The streaming provider is also running an aggressive subscription marketing campaign for $0.99 per month for its on-demand channel. That should further bolster its subscription numbers in the coming quarter and help pick up the slack if Disney Plus fails to garner enough new subscribers.
At the end of last quarter, Hulu had 4 million subscribers for its Hulu Live offering and an average revenue per user (ARPU) of $84.89, a jump of 18% from last year's figures. In the past year, Disney investors have rewarded its stock for subscriber gains.