Disney's standoff with Charter is about to face its biggest test yet: NFL season

More than 14 million Spectrum subscribers will be unable to watch Monday night's NFL game between the Buffalo Bills and the New York Jets if an ongoing dispute between Charter (CHTR) and Disney (DIS) drags on.

Disney pulled its owned and operated channels including ESPN and ABC off Charter Spectrum cable systems late last week as the two hit a stalemate over whether Disney should give Charter subscribers free access to its ad-supported streaming services as part of the telecom giant's cable packages.

Now the blackout, which has already impacted a slew of high-profile sporting events including the US Open, will soon affect the most-watched sports league in the US: the NFL.

Disney's ESPN network carries the rights to Monday Night Football while NBC, owned by Comcast (CMCSA), hosts Sunday night games. Amazon (AMZN) famously bought the rights to Thursday Night Football in 2021. Fox (FOXA) and CBS (PARA) split the the rest.

"The timing is very auspicious," Macquarie senior analyst Tim Nollen told Yahoo Finance, suggesting Charter will "leverage" the upcoming NFL season to its advantage.

Disney faces the loss of 14.7 million Charter pay TV subscribers, or 20% of ESPN's current linear subscriber base of 74 million, Nollen said. That equates to linear revenue losses of roughly $5 billion, or 6% of overall revenue.

"For Disney to be down 20% in terms of its available audience that means [it'll also be down] 20% in ad revenue on top of the subscriber fees," the analyst explained.

Meanwhile, Charter faces the risk that frustrated football fans could cut off their cable packages, a trend that is already threatening the pay-TV model.

Nollen added the kickoff to NFL season ups the pressure for both sides to strike a deal: "It's just about the biggest timing of the year. There might be only one or two other points on the sports calendar that matter more than the timing here."

'Sense of urgency' to resolve dispute

On Thursday, Charter CEO Chris Winfrey said the company has "a sense of urgency" to resolve the dispute given its consumers are "stuck in the middle"; however, he also hinted that little progress has been made so far.

"If I had anything material to highlight, I would. So that should tell you something in terms of how we're doing," the executive said Thursday at Goldman Sachs' annual "Communacopia" tech conference.

Charter has focused on offering more bundles amid the cord-cutting phenomenon, hence its desire to include more streaming plans in packages. On top of that, Disney plans to take ESPN fully over the top as a direct-to-consumer streaming service — another incentive for Charter to lean into streaming.

"Everybody knows the day is coming for ESPN to go over the top," Nollen said. "So from both companies' perspectives, it's a matter of how much they want to accelerate that issue right now."

'Disney is the linchpin'

Charter's Winfrey said Thursday the end of this dispute will ultimately be decided by Disney.

"Disney is the linchpin, ESPN is the linchpin," Winfrey stated. "They have the opportunity to lead here and drive the industry ... I'm rooting for them to make that decision."

Shortly following Winfrey's comments, Disney issued a statement, writing in part, "As the US Open reaches the men’s and women’s finals, and fans gear up for a weekend of college football and the opening of the NFL season, it’s unfortunate that Charter decided to abandon their consumers by denying them access to our great programming."

"The question for Charter is clear: Do you care about your subscribers and what they’re telling you they want – or not? Disney stands ready to resolve this dispute and do what’s in the best interest of Charter’s customers," the statement continued.

Looking ahead, Macquarie's Nollen expects the dispute to be resolved by next week given its high-stakes nature, but also acknowledged that this is a different — and perhaps more existential — type of conflict.

"This is about the future of sports streaming and the ultimate end of the pay TV bundle one day," Nollen said. "That one day may be coming sooner rather than later."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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