YouTube TV subscribers lose ESPN channels, others during Timberwolves game in contract dispute

Nearly 4 million YouTube TV customers lost access to ESPN, ABC, FX and other Walt Disney Co.-owned channels late Friday after a breakdown in negotiations over a new distribution agreement.

Tensions between the two powerful giants flared over contract terms, including fees that Disney has been demanding Google pay for the rights to distribute Disney's linear TV channels as part of Google's YouTube TV's bundle of live channels. The Burbank entertainment company has been using the popularity of its networks as leverage to increase fees at a time when the cost of programming — particularly sports programming — has skyrocketed.

The deadline for a deal was 8:59 p.m. PST, and the deadline came and went without an accord.

"We've held good faith negotiations with Disney for several months. Unfortunately, despite our best efforts, we've been unable to reach an equitable agreement before our existing one expired, and their channels are no longer available on YouTube TV," YouTube TV said in a statement on its website. "We know this is frustrating news for our customers, and not what we wanted. We will continue conversations with Disney to advocate on your behalf in hopes of restoring their content on YouTube TV."

The outage came during an ESPN broadcast of the Timberwolves-Los Angeles lakers game, upsetting some basketball fans who took to Twitter to complain.

Disney, for its part, attributed the impasse to resistance from YouTube.

"We've been in ongoing negotiations with Google's YouTube TV and unfortunately, they have declined to reach a fair deal with us based on market terms and conditions," Disney Media and Entertainment Distribution said in a statement late Friday.

"We stand ready to reach an equitable agreement with Google as quickly as possible in order to minimize the inconvenience to YouTube TV viewers by restoring our networks," Disney said. "We hope Google will join us in that effort."

Neither side identified the sticking points that led to the blackout.

The two sides telegraphed earlier this week that they were struggling to reach a new distribution pact for the 18 Disney-owned channels — about one-fifth of the more than 85 channels that YouTube TV carries.

Failing to strike a deal is risky for both sides. The Disney channels — which add about $15 a month to each YouTube TV subscriber's bill — are among the industry's most popular channels, and ESPN is among the most expensive. But for sports fans, ESPN is a must-have channel, and the network's schedule is chock full of college football bowl games through next month.

"I will cancel immediately if you can't work a deal," one YouTube TV subscriber wrote on Twitter earlier this week. "I know you need to negotiate in good faith, but the ESPN networks are literally the only thing I am guaranteed to watch on your platform. Good luck with this."

For Disney, a lengthy blackout would cut into revenue at a time when the company is racing to produce programming for its streaming platforms as well as its traditional channels. Disney executives have told Wall Street that it expects to spend $33 billion next year on programming. Disney has long held one of the best records in the industry for working quietly behind the scenes to avoid blackouts.

YouTube TV said it would knock $15 off the customers' bills as long as they went without the suite of Disney channels.

"We will be decreasing our monthly price by $15, from $64.99 to $49.99 while this content remains off of our platform," YouTube TV said in its Friday night statement.

YouTube TV is one of the most successful digital providers of pay-TV channels. It also competes head to head with the Disney-owned Hulu live TV service.