DirecTV's Chief Financial Officer, Ray Carpenter, recently advocated for smaller pay-TV bundles that consist of only the most engaging channels. Carpenter expressed his belief that reducing the number of channels to a range between 10 and 50 would better align with customer preferences. The statement was made during a conference call with Wall Street analysts on Tuesday, amidst an ongoing blackout of 16 Disney networks, including ABC and ESPN, for DirecTV's 11 million-plus subscribers.

The dispute between DirecTV and Disney, which occurred during the start of the college football and NFL seasons, has captured the attention of both the media industry and Wall Street, given the rising trend of cord-cutting and uncertainty surrounding the future of pay-TV bundles. Over the last decade, the number of pay-TV households in the United States has decreased from over 100 million to just above 70 million.

At the heart of the conflict lies the concept of slimmer channel packages, a notion favored by price-sensitive consumers as well as broadcasters and distributors affected by cord-cutting. DirecTV claims that it offered Disney various smaller bundle options, including a sports-focused package, but was met with rejection. However, Disney strongly denies this, stating that DirecTV failed to engage with their proposals.

Carpenter's remarks and accompanying presentation deck shed light on DirecTV's vision for a brighter future for pay-TV. He highlighted the increasing complexity faced by consumers in managing multiple subscriptions and applications, leading to higher rates of churn. In light of this, DirecTV is considering sacrificing potentially lower profit margins to reduce churn rates in the long term.

Analysts raised questions about DirecTV potentially capitulating once Monday Night Football and the NFL return next week, similar to what Charter did in a battle with Disney a year ago. Carpenter firmly asserted that the fight with Disney is "existential" for DirecTV and not a strategic maneuver to leverage the situation. He emphasized their readiness to continue the dispute for as long as necessary.

The ongoing clash between DirecTV and Disney takes place amidst another significant setback for Disney. A New York federal judge recently blocked the launch of Venu Sports, a pay-TV joint venture involving Disney, Fox, and Warner Bros., on antitrust grounds. Industry analyst Craig Moffett sees this legal defeat, combined with the DirecTV-Disney dispute, as potentially catastrophic for the traditional TV business.

Moffett emphasized the importance of bundling for the pay-TV industry, stating that the absence of bundling would lead to the rapid erosion of linear TV and its economics. He speculated that an a la carte model, even with higher prices for "must-have" networks, would not be able to replicate the current model's revenue.

When asked about the Venu ruling, Carpenter expressed no surprise and suggested that even if the service does not launch, the plans and the accompanying antitrust suit by Fubo would highlight the flaws in the current pay-TV system to a wider audience.

The ongoing standoff between DirecTV and Disney continues to generate interest and speculation within the media industry and Wall Street as the landscape of pay-TV undergoes significant transformation. The potential consequences of this dispute, combined with the legal setback of the Venu Sports joint venture, have raised concerns about the future viability of the traditional TV business as we know it.