Disney losing $4 million daily in its YouTube TV fight

Disney lost the remote – and about $4 million a day with it. YouTube TV picked up ESPN, ABC, FX, National Geographic and other Disney-owned networks after the two’s carriage deal expired on Oct. 30, erasing Disney’s most profitable channels from one of the nation’s biggest streaming packages.

Today, Morgan Stanley analysts estimate that the outage is costing Disney about $30 million a week in lost affiliate fees and ad revenue, or about $4.3 million for every 24 hours the screen remains dark.

This is a familiar fight in an unfamiliar arena. Disney wants higher carriage fees, arguing that ESPN and ABC remain essential for live sports and prime-time broadcasting. Alphabet, Google’s parent company, which also owns YouTube TV, says the demands would result in price hikes for subscribers and upend price parity agreements with other distributors. In the old cable-dominated world, Disney could wait out a power outage; consumers had fewer choices and networks had leverage. But YouTube TV is now the largest live TV streaming service in the United States, with more than nine million subscribers and a growing hold on the distribution side of the business.

The timing couldn’t be worse for Disney.

ESPN is in its peak sports season – the NFL, NBA, college football and even hockey – and each day of blackout erodes the audience that advertisers pay to reach. ABC’s fall lineup is also in full flight, costing the network’s prime-time inventory during a key advertising window. Analysts estimate that if the conflict continues into next week, cumulative losses could exceed $60 million. It may not change Disney’s market cap, but it will deepen an uncomfortable narrative: A company once defined by its dominance in linear television now gets daily hits from a platform that didn’t exist when cable was king.

Google can probably afford to be patient. It’s offering affected YouTube TV subscribers a $20 credit, a move that costs far less than giving in to Disney’s pricing demands. (However, this sparked its own controversy, as users accused the company of hiding how to claim bill relief.) YouTube TV is betting that viewers will be more tolerant of missing a few games than they will be tolerating higher monthly fees. This is so far a small-scale experiment in determining who controls the value chain, and early evidence suggests that distribution has the upper hand.

For Disney, the outage adds to a pile of pressures already weighing on CEO Bob Iger: streaming profitability goals, restructuring costs and ESPN’s uncertain path toward a standalone app or joint venture. The loss of visibility on YouTube TV does not threaten the survival of the company, but it reduces its influence at a delicate moment. Each dark day means fewer impressions, fewer ad dollars and more pressure to settle before this fight begins to eat away at the company’s November profits — which arrive before the bell on Thursday.

Most analysts expect the conflict to end soon – neither side has any interest in prolonging it until the end of the football season. But when the screens come back to life, the lesson will endure. In the new television order, the content may still be the show, but the cast controls things.