Disney, Charter near distribution deal

(Reuters) -Walt Disney and Charter Communications (NASDAQ:) are nearing a distribution deal that would see the entertainment giant’s programming return to the Spectrum cable service, CNBC reported on Monday, citing sources familiar with the matter.

Charter, one of the biggest cable companies in the United States, has been locked in a distribution battle with Walt Disney (NYSE:) over how much its channels are worth and how to package them.

Disney shares rose 1.9% and Charter was up 2.5% after the CNBC report. The two companies did not immediately respond to a request for comment.

ESPN, ABC and other Disney channels disappeared from Charter’s Spectrum cable service on Aug. 31, depriving its nearly 15 million video subscribers of access to the U.S. Open tennis tournament, college football and other programming.

Charter pays Disney more than $2.2 billion annually for the right to distribute ABC, ESPN, FX and other channels to subscribers, which include major markets like New York and Los Angeles.

Companies like Charter say rising distribution fees are forcing cable companies to increase prices, causing consumers to leave. This “vicious video cycle” has cost the industry 25 million customers the last five years, according to a Charter presentation.

Disney is trying to manage declining cable subscribers as it builds streaming offerings. The company counts on fees companies such as Charter pay to partly cover rising programming costs, including the rights to air sports such as the NFL and NBA. It wants to keep as many cable subscribers as possible while it prepares to offer ESPN directly to consumers on an app. Disney has balked at Charter’s demand that it provide Disney+ for free.