Shares of several U.S. entertainment companies including Fox Corp and Warner Brothers Discovery Inc were dragged down on Friday by a dispute between media heavyweight Disney and cable provider Charter Communications over television distribution fees, according to Reuters.
Disney on Thursday night blocked its cable channels, including ESPN and ABC, from being shown on Charter's Spectrum network after the two companies failed to secure a distribution agreement. Spectrum is the second largest U.S. cable provider, serving 14.7 million homes across large markets such as New York and Los Angeles.
The dispute soured investor sentiment on the sector, which has also been grappling with the Hollywood writers and actors strike over wages and other issues which have raised doubts about whether companies will have enough content in coming months.
"The drop in Disney this morning looks to be tied to the company's ongoing contract negotiations with Charter Communications," said Art Hogan, chief market strategist at B Riley Wealth. "Another source of concern sits with the ongoing strikes with both actors and writers in Hollywood."
Charter said Disney rejected its proposal for a new distribution deal that takes into account the rise of competing low-cost streaming services, which has fueled cord-cutting among its customers. The cable provider said it pays Disney $2.2 billion in annual programming costs, excluding advertising.
"Disney - so far - has insisted on a traditional long-term deal with higher rates and limited packaging flexibility," Charter said in a presentation published on Friday.
Disney said on Thursday it has reached successful deals with pay TV providers across the country and that the rates and terms it sought with Charter "are driven by the marketplace."
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