Warner Bros. Discovery and Charter Communications agreed to a new distribution deal Thursday, bolstering a key revenue stream for the embattled media company run by David Zaslav.
The new pact was signed a year before the previous one was set to expire, as the head of Warner Bros. Discovery was eager to prove his company and its TNT cable channel could work despite losing the National Basketball Association game in May after investors realized the NBA broadcasting deal was becoming too rich for the company, which had prioritized paying down debt.
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Still, the Charter deal gives Warner Bros. and Discovery market power. The pact also gives Charter an incentive to promote Warner Bros. and offer Discovery’s streaming service, Max, to Spectrum customers.
Warner Bros. Discovery shares rose more than 10 percent in trading on Thursday, to $7.66 per share.
The two companies also wanted to reach a deal quickly to avoid further disruption in the pay-TV industry, which has seen ESPN, ABC and others pull out of satellite TV providers DirecTV and U-Verse.
DirecTV has been exploring flexibility to offer smaller channel bundles to customers without having to pay steep fines to Disney if it doesn’t meet the company’s “minimum penetration” standards.
People familiar with the terms of the deal said Charter has agreed to pay Warner Bros. a higher fee for Discovery’s channels, whose portfolio includes CNN, HGTV, TBS, Food Network, Animal Planet and TLC.
But Charter isn’t willing to pay a higher fee for TNT, which is already a pricey channel because of sports rights including the NBA and pro hockey (TNT has NBA coverage for one more season).
Zaslav declared victory while speaking at a Goldman Sachs investor conference. “We held the price of TNT,” he said. “No channels were dropped.”
He added: “Overall, this is a great deal for Charter and a great deal for us.”
Cable TV and broadband providers in Stamford, Connecticut, also scored some wins.
Since last year, Charter has been focused on avoiding deals that force customers to pay twice for the same content – a dispute over the issue led to a nearly 12-day blackout at Walt Disney Co. The channel for Spectrum customers will launch in September 2023.
Since then, Charter has inked distribution deals with Disney, AMC Networks and now Warner Bros. Discovery will allow Spectrum subscribers to watch shows from those companies on its associated streaming apps at no extra cost.
Charter offers its video subscribers the HBO linear channel (along with additional options on the streaming app Max) for about $15 a month, with most of that money going to Warner Bros., according to a release.
Once the new deal is in place, those Spectrum customers will be able to cut their HBO bill by switching to the ad-supported version of Max, which includes HBO programming. The Discovery+ streaming service will also be offered to Spectrum subscribers at no extra cost.
The new arrangement with Warner Bros., Discovery, allows Spectrum to offer its $60-per-month streaming service product to customers at no extra cost, Charter said in a statement.
“By including ad-supported versions of Max and Discovery+ at no extra cost across our most popular packages, we are able to deliver the most value to our customers,” Charter Chief Executive Officer Chris Winfrey said in a statement.
Charter will also help market the streaming service in exchange for a cut of the revenue generated by signing up customers.
