Warner Bros. Discovery and Charter Communications agreed to a new distribution deal Thursday, shoring up a key revenue stream for the embattled media company run by David Zaslav.
The new deal comes a year before the previous contract was set to expire. The Warner Bros. Discovery chief was motivated to prove that his company and its TNT cable channel would succeed despite losing National Basketball Association games. Warner Bros. Discovery shares plunged in May as investors acknowledged that the NBA streaming deal had proven too expensive for the company that has prioritized paying down debt.
Warner Bros. Discovery sued the NBA over the loss of its television rights. The company also suffered a $9 billion writedown in the value of its cable channels, including TNT.
Still, the Charter deal shows that Warner Bros. Discovery has maintained its market power. The deal also gives Charter an incentive to promote Warner Bros. Discovery’s streaming service, Max, to its Spectrum customers.
Warner Bros. Discovery shares rose 7% to $7.42 a share in midday trading.
The two companies were also eager to reach a quick deal amid more turmoil in the pay-TV industry. Walt Disney Co. channels including ESPN and ABC were dropped from satellite TV provider DirecTV and U-Verse amid contentious negotiations over a new contract.
That blackout has been in place for 12 days now. DirecTV has been seeking flexibility to offer its customers smaller channel packages without having to pay Disney hefty fines for failing to meet the company's “minimum penetration” thresholds.
People familiar with the terms of the deal said Charter agreed to pay higher fees for Warner Bros. Discovery channels. Its portfolio includes CNN, HGTV, TBS, Food Network, Animal Planet and TLC.
Charter won't pay higher rates for TNT, though, which is already a higher-priced channel because of its sports rights, including the NBA and pro hockey. (TNT has the NBA rights for one more season.)
Zaslav declared victory at a Goldman Sachs investor conference. “We kept the price of TNT,” he said. “No channel was removed.”
He added: “Overall, it’s a great deal for Charter and it’s a great deal for us.”
David Zaslav, CEO of Warner Bros. Discovery.
(Evan Agostini / Invision / AP)
The Stamford, Connecticut-based cable and broadband provider also scored some wins.
Since last year, Charter has been focused on making sure it doesn’t sign contracts that force customers to pay twice for the same content. A dispute over that issue led to a nearly 12-day blackout of Walt Disney Co. channels for Spectrum customers in September 2023.
Charter has since structured distribution deals with Disney, AMC Networks and now Warner Bros. Discovery that allow Spectrum subscribers to watch those companies’ programming on the related streaming app without paying extra.
Charter has been offering its video subscribers HBO’s linear channels (along with the option to add the Max streaming app) for about $15 a month, with most of that money going to Warner Bros. Discovery.
Under the new deal, Spectrum customers would be able to eliminate HBO charges by switching to the ad-supported version of Max, which includes HBO shows. The Discovery+ streaming service will also be offered to Spectrum subscribers at no additional charge.
Charter said in the statement that the new agreement with Warner Bros. Discovery allows Spectrum to offer streaming service products for $60 per month to its customers at no additional charge.
“The inclusion of ad-supported versions of Max and Discovery+ in our most popular packages at no additional cost ensures we are delivering the greatest value to our customers,” Charter CEO Chris Winfrey said in a statement.
Charter will also help market the streaming services in exchange for a share of revenue generated from customer subscriptions.
