Warner Bros. Discovery and Charter Communications agreed to a new distribution deal Thursday, shoring up a key revenue source for the beleaguered David Zaslav-run media company.
The new pact comes a year before the previous contract was set to expire. The Warner Bros. Discovery chief was motivated to prove his company and its TNT cable channel would do fine despite losing National Basketball Assn. games. Warner Bros. Discovery’s stock plummeted in May when investors recognized the NBA broadcast deal had become too rich for the company, which has prioritized paying down debt.
Warner Bros. Discovery sued the NBA over the loss of its TV rights. The company also took a $9-billion write-down on the value of its cable channels, including TNT.
Still, the Charter deal demonstrates that Warner Bros. Discovery has maintained market muscle. The agreement also gives Charter an incentive to promote Warner Bros. Discovery’s streaming service, Max, to its Spectrum customers.
Warner Bros. Discovery’s stock rose more than 10% to $7.66 a share in Thursday trading.
The two companies also were eager to reach an early agreement and avoid further turmoil in the pay-TV industry. Walt Disney Co. channels, including ESPN and ABC, have been dropped from satellite TV provider DirecTV and U-Verse amid contentious negotiations over a new contract.
That blackout is now in its 12th day. DirecTV has been seeking flexibility to offer its customers smaller channel bundles without having to pay steep penalties to Disney for not reaching the company’s “minimum penetration” thresholds.
People familiar with the deal terms said Charter agreed to pay higher rates for Warner Bros. Discovery’s channels. Its portfolio includes CNN, HGTV, TBS, Food Network, Animal Planet and TLC.
However, Charter won’t pay higher rates for TNT, which already is a higher-priced channel due to its sports rights, including NBA and professional hockey. (TNT has rights to the NBA for one more season.)
Zaslav declared victory while speaking at a Goldman Sachs investor conference. “We held [the] price on TNT,” he said. “There were no channels that were dropped.”
He added, “Overall, it’s a great deal for Charter and it’s a great deal for us.”
Warner Bros. Discovery Chief Executive David Zaslav.
(Evan Agostini / Invision / AP)
The Stamford, Conn., cable TV and broadband provider came away with a few wins, too.
Since last year, Charter has been focused on making sure that it doesn’t enter into contracts that force customers to pay twice for the same content. A tussle over that issue led to a nearly 12-day blackout of Walt Disney Co. channels for Spectrum customers in September 2023.
Since then, Charter has structured distribution deals with Disney, AMC Networks and now Warner Bros. Discovery that allow Spectrum subscribers to watch those companies’ programming on related streaming apps without paying extra.
Charter has offered its video subscribers the HBO linear channels (along with the option of adding the streaming app Max) for about $15 a month, with most of that money going to Warner Bros. Discovery.
With the new deal in place, such Spectrum customers could eliminate HBO charges by switching to the ad-supported version of Max, which includes the HBO shows. The Discovery+ streaming service also will be offered to Spectrum subscribers at no additional charge.
Charter said in the statement that the new arrangement with Warner Bros. Discovery allows Spectrum to offer $60 a month of streaming service products to its customers for no extra charge.
“The inclusion of the ad-supported version of Max and Discovery+ in our most popular packages at no additional cost ensures we provide the most value to our customers,” Charter Chief Executive Chris Winfrey said in a statement.
Charter will also help market the streaming services in exchange for a portion of the revenue generated by customer sign-ups.
