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Analysis: For Disney, Altice Was Not Just Another Deal

The prospect of TV channels going dark due to a standoff between a media conglomerate and an MVPD has become so commonplace in recent years that it barely registers anymore. And with less than 4% of Disney’s total TV reach coming through its New York-based cable TV footprint, Altice USA may not have loomed too large as challenges go for Bob Iger.

But the implications of Disney reaching agreement on an affiliate-fee renewal Sunday after extended talks with Altice shouldn’t be easily ignored.

Even without yet knowing the deal points, Altice-Disney needs to be appreciated less than however those particulars emerge and more as an indicator of what comes next for Disney. Altice is just the first of many affiliate deals Disney will begin striking over the coming months with the country’s reigning pay TV providers. The conglomerate is embarking on a fresh cycle of deals, its last batch having been completed by the end of 2014.

Disney wants to reinvigorate a critical revenue stream that has seen growth come down across the industry to the low single digits for all involved. Altice will help set the prices that will be paid by other distributors, including a few that got a lot bigger since the last time Disney stared across from them at a negotiation table, including the combined forces of AT&T-DirecTV Now and Charter-Time Warner Cable.

This could have been the first major blackout of the skinny bundle era, a notable milestone. Because this time around, it would not just be pay-TV alternatives from leading satellite and telco services that would have stepped up its marketing in the blackout-affected market, but Hulu, YouTube, Sling TV, Playstation Vue.

They could have hit pay dirt going after an audience newly sensitized to the insanity of a marketplace where companies stop providing an indispensable product because they can’t reach a deal with each other. Verizon’s FiosTV is heavily concentrated in Altice’s footprint as well; surely Disney and Altice appreciated the competitive dynamics, motivating getting a deal done.

This could have been the first major blackout of the skinny bundle era, a notable milestone.

Another potential factor that weighed on the negotiations: After a bruising publicity nightmare in recent weeks over ESPN regarding Jemele Hill, Disney’s willingness to get dragged through the mud again during a blackout scenario was probably close to zero.

What a difference several years makes. While there’s no more vigorous debate to be had within the media sector right now than over the health of the company, what can’t be argued is that Disney is not as dominant as it once was. While the corporation couldn’t be any stronger at this juncture than on the film and parks fronts, the state of the TV business that is its primary profit driver has been weakened. There’s macro conditions to blame, from the erosion diminishing subscriber levels across the pay-TV universe to more Disney-specific concerns like ESPN, which has crushing sports-rights costs and struggling franchises like “Sportscenter.”

The hammer Disney once had with ESPN’s “Monday Night Football” in tow, for instance, doesn’t carry as much weight considering how much that franchise’s audience has declined in recent years. The prospect Altice subs face losing “MNF” for a week or two didn’t feel as cataclysmic as it did just a few years ago, when the anticipated backlash might have kept these companies going at the negotiation table just a little while longer.

Disney doesn’t have the leverage it once enjoyed, that much is clear. But in a TV business where ad rates have actually increased amid declining audiences, don’t underestimate how much clout Disney still has, either.

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