Disney shifts to basic

Move from pay tier starts to pay off for cabler

NEW YORK — The Disney Channel’s aggressive push to shift its identity from a pay network to a basic service is paying off big time — the channel has added 8 million subscribers in just the last six months, climbing to a total of 35 million.

That’s the good news. But there’s a downside to being a hybrid: the bad news is that 4 million of the 35 million total are pay subscribers — the other 31 million get Disney Channel as part of their basic-cable service.

The 4 million figure is a depressing number to Disney because only about 10% of the subscribers to a cable system that of-fers Disney Channel as a pay network actually subscribe to the channel.

If Disney could get those systems to transform the Disney Channel from a pay to a basic network, the four million would shoot up to approximately 40 million with a wave of Tinkerbell’s wand: The basic tier reaches more than 95% of the subscriber base of just about all cable systems in the U.S.

Sources say the most intransigent holdout to transforming Disney Channel from a pay to a basic network is Time Warner Cable, the largest cable operator in the country, whose systems in New York, Texas, Wisconsin and North Carolina and all of Florida except Tampa continue to charge subscribers an extra monthly fee for the Disney Channel.

Time Warner’s argument, one insider says, is that Disney is asking too much money in license fees from cable operators for the shift of the channel to basic.

For example, the Time Warner system in New York City, which reaches 1.1 million subscribers, shares the revenues from its subscribers who pay extra for the Disney Channel (from $12.95 a month to $6.95 a month, depending on the number of pay channels a subscriber buys). By contrast, Time Warner’s N.Y. system would have to pay as much as $10 million a year in cash license fees to Disney if it put the channel on basic.

Disney’s response is that because it accepts no advertising, it needs bigger subscriber fees than the basic cable networks that harvest most of their revenues from advertising.

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