Disney’s feud with Spectrum owner weighs on entertainment stocks

The shares of several entertainment companies, including Fox Corp. and Warner Brothers Discovery, were dragged down on Friday by a dispute between media giant Disney and cable provider Charter Communications over television distribution fees.

Disney suspended its cable channels, including ESPN and ABC, from broadcasting on Charter’s Spectrum network Thursday night after the two companies failed to strike a distribution agreement. Spectrum is the second largest US cable provider, serving 14.7 million homes in major markets such as New York and Los Angeles.

The row dampened investor sentiment in the industry, which was also grappling with Hollywood writers and actors going on strike over wages and other issues, raising doubts about whether companies will have enough content in the coming months.

Disney shares fell 2.65% to a three-year low, while Charter fell 3.4%. Warner Brothers Discovery lost 10%, Fox lost 6%, Paramount Global lost 8% and Comcast, the largest US cable provider, lost nearly 3%.

“Disney’s decline this morning appears to be related to the company’s ongoing contract negotiations with Charter Communications,” said Art Hogan, chief market strategist at B Riley Wealth. “Another cause for concern is the ongoing strikes among both actors and writers in Hollywood.”

According to Charter, Disney rejected its proposal for a new distribution deal that accommodates the emergence of competing low-cost streaming services, which has led to rip-offs from its customers. The cable provider said it pays Disney $2.2 billion in annual programming expenses, excluding advertising.

“Disney has – so far – insisted on a traditional long-term contract with higher tariffs and limited packaging flexibility,” Charter said in a presentation released Friday.

Disney said Thursday it has signed successful deals with pay-TV providers across the country and that the rates and terms it is targeting with charters “will be driven by the market.”

“This charter Disney deal, which didn’t go through here, has unsettled the market, at least this sector, a little bit,” said Dennis Dick, market structure analyst at Triple D Trading.