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Charter: Disney needed to be 'first mover' in historic deal, ESPN was 'the linchpin'

Charter (CHTR) said it needed Disney (DIS) to be "the first mover" in the precedent-setting deal the two companies struck earlier this week after Disney pulled its owned and operated channels, including ESPN and ABC, off Charter Spectrum cable systems in late August.

"We needed them to be a first mover to get us into this transformational model," Charter CFO Jessica Fischer said at the Bank of America Media, Communications, and Entertainment Conference Wednesday. "Overall, we believe that going forward in the long term, we'll be able to moderate the growth in content costs for consumers based on what happened in the arrangement with Disney."

The two companies had hit a stalemate in contract negotiations over whether Disney should give Charter subscribers free access to its ad-supported streaming services as part of the telecom giant's cable packages. The blackout impacted a slew of high-profile sporting events including the US Open and arrived on the heels of the NFL's debut — upping the pressure for both sides to make a deal.

On Monday, the companies announced that they had reached an agreement to end the media blackout. As part of the deal, Charter will offer some Disney streaming services — the ad-supported version of Disney+, ESPN+, and ESPN's yet-to-be-launched direct-to-consumer offering — as part of select cable packages at no additional cost to the consumer.

"[Disney] had the linchpin asset in ESPN," Fischer said. "You couldn't move to a new transformational model without ESPN. So because of that, we needed [Disney] to lead, which I think we said often, and it was true."

In an interview with The Hollywood Reporter, ESPN Chairman Jimmy Pitaro indicated Disney was able to secure "very strong" rate increases for ESPN — something Fischer said Charter was willing to accept given the value of the sports network.

Charter has focused on offering more bundles amid the cord-cutting phenomenon, hence its desire to include more streaming plans in packages. Fisher said the new deal will help "stabilize the linear video ecosystem" while also providing "a glide path that gets us to the new direct-to-consumer environment."

FILE - Charter said ESPN was the 'linchpin' in its negotiations with Disney (AP Photo/Jenny Kane, File)
Charter said ESPN was the 'linchpin' in its negotiations with Disney (AP Photo/Jenny Kane, File) (ASSOCIATED PRESS)

Wall Street analysts have called the agreement a win for both sides as Charter nabbed more flexibility within the traditional cable bundle while Disney's streaming platforms will benefit from more visibility as Charter subscribers sign up for the services.

Still, Disney did give up a host of networks in exchange for the strong ESPN rates. Networks that will no longer be included in Spectrum TV video packages are Baby TV, Disney Junior, Disney XD, Freeform, FXM, FXX, Nat Geo Wild, and Nat Geo Mundo.

Spectrum will continue to carry ABC Owned Television Stations, Disney Channel, FX, and the Nat Geo Channel, in addition to the full suite of ESPN networks.

"Like much of this deal, we anticipate this setting a precedent for similar surgical culling in all future renegotiations across the industry," MoffettNathanson analyst Michael Nathanson wrote in a note on Monday.

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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