Disney, Altice reach deal that avoids ESPN blackout

LOS ANGELES (Reuters) - Walt Disney Co DIS.N and cable operator Altice USA ATUS.N reached a tentative programing deal that keeps ESPN and other networks in the homes of millions of New York-area pay TV customers, the companies said in a statement on Sunday.

The main gate of entertainment giant Walt Disney Co. is pictured in Burbank, California May 5, 2009. Disney is scheduled to report its second-quarter earnings May 5, 2009. REUTERS/Fred Prouser

Disney and Altice have been sparring over how much the cable operator would pay to continue carrying ESPN, ABC and other channels on its Optimum cable service. Both sides are under pressure from cord cutting, or dropping of pay TV service, as audiences flock to cheaper streaming services.

“We have reached an agreement in principle and have extended the deadline accordingly to try and finalize the terms,” a joint statement from the companies said.

The last-minute deal came Sunday as Disney was preparing to pull its networks from Optimum. That could have deprived customers from seeing Tuesday’s baseball playoff game between the Minnesota Twins and New York Yankees as well as “Monday Night Football” and other programing. A blackout could have sent customers fleeing to other options.

Disney secured fee increases for ESPN, local affiliate WABC and other major networks, according to sources familiar with the talks who requested anonymity because the negotiations were private.

The amount of the increases was not disclosed. Altice said in September it had offered to pay higher fees but called Disney’s proposal at the time “outrageous.”

Altice USA is the fourth-largest U.S. cable operator, formed by Netherlands-based Altice NV ATCA.AS through its acquisitions of Cablevision -- now known as Optimum -- and Suddenlink Communications. Optimum has 3.1 million customers in New Jersey, New York, Connecticut and Pennsylvania.

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The discussions with Altice were the first among several Disney is scheduled to have with cable operators over the next two years as current programing deals expire.

ESPN, Disney’s most important network, has been losing subscribers and seeing its ratings fall. That has cut revenue from cable operators, which pay monthly fees for each subscriber, and given Altice ammunition to push back against Disney’s demands as excessive.

Disney countered that Altice charges the average customer $160 or more per month and “the bulk of that money goes into their pocket.”

ESPN is the most expensive basic cable network, charging an average of $7.54 per subscriber each month, according to S&P Global Market Intelligence’s Kagan research group. The channel also is among the most popular, ranking as the fourth most-watched national cable network in Optimum households over the past year.

Reporting by Lisa Richwine; Additional reporting by Anjali Athavaley in New York; Editing by Sandra Maler & Simon Cameron-Moore