A fear of cord-cutting played a towering role in Time Warner Cable's negotiations on its new carriage deal with Disney. So much so that TWC will soon make ESPN3.com available only to subscribers who pay for TV service.
TWC is the only distributor to negotiate a deal placing that wall around the live-sports site. Every other provider that offers ESPN3 -- from Comcast to Verizon -- allows a customer to subscribe only to its broadband service for free entry.
But at TWC, a customer who pays it $48.99 a month for broadband, but gets DirecTV, will be blocked out.
Bright House Networks joins TWC with the game-changing requirement, since it is a party to the Disney deal.
ESPN3 and Hulu may be the sites that present distributors with the greatest cord-cutting threat. That's when a person feels satiated enough with Web content to drop TV service.
With the exception of "Monday Night Football," nearly every major event ESPN carries on the tube is simulcast live on ESPN3. That includes the Bowl Championship Series, the NBA playoffs, Duke vs. North Carolina basketball, etc.
Even so, Disney bills ESPN3 as a distinct broadband channel and charges operators TV-style affiliate fees for rights to provide it. ESPN also touts the service as a way for distributors to gain and keep broadband subscribers. And dozens of operators have bought it.
But if any distributor were to be a contrarian and question why it should pay ESPN to simply stream the same content online that's on the TV, it would be TWC. CEO Glenn Britt was the first top cable executive to raise concerns about networks making episodes of shows available free online -- and how that poses a major threat to maintaining a traditional business model.
With the Disney deal, TWC is saying: "If you want TV online, then pay for TV -- and pay us." If you just want our broadband service to go with your Dish Network, that's not enough. The flip side has a different dynamic: a TWC TV customer with Verizon broadband would have ESPN3 gratis.
TWC has an additional restriction to further fight free simulcasting. ESPN3 will be accessible only to customers with a TV package that includes ESPN. Those with a $20-a-month base "reception" package will be locked out.
The structure is in keeping with the "TV Everywhere" movement in the cable industry, where operators are willing to offer Web access to TV content as long as a cable bill is paid. TWC customers will have to go through an authentication process online before watching the Masters on ESPN3. But once completed, it means access on any computer, anywhere. By using "TV Everywhere," TWC has, in a sense, turned ESPN's proud broadband offering into a TV channel. Its availability on the Web will be on par with how TWC will offer other cable networks' top-tier content online. Some ESPN3 content will be made available ... on TV, albeit on a TWC sports tier.
Still, the deal with TWC gives Disney a chance to reach TWC's huge customer base with ESPN3, propelling ad sales on the site. The bulk of the 12.7 million TWC homes with TV are now potential users. And a heavy portion of Bright House's 2.4 million customers are eligible as well.
Heading into the Disney negotiations, TWC may have found its subscriber trends to augur at least some cord-cutting risks. In the last year, TWC has lost 342,000 TV customers -- but gained 534,000 broadband homes.
TV service is still the revenue gem, generating $2.8 billion in the second quarter compared to $1.2 billion for broadband.
For now, that's the same as Disney networks. Even as TWC held a hard line on ESPN3, Disney was able to gain carriage of a new ESPN highlights-only channel and the coming Disney Junior network.