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Roula Khalaf, editor-in-chief of the FT, selects her favourite stories in this weekly newsletter.

A new Labor Day tradition has dawned in the US: Disney is embroiled in a messy contract dispute with another television giant, with both sides trying to survive in a new world order in entertainment.

Disney’s contract with satellite provider DirecTV expired this past weekend without an extension in place, leaving DirecTV customers missing the start of the American football season and the middle rounds of the US Open tennis tournament.

Such carriage disputes have become commonplace. Exactly one year ago, Disney was fighting over a renewal with John Malone’s Charter Communications. But in the intervening year, the decline of linear television has only accelerated. Worse for Disney, a recent legal setback could threaten its usual ability as the expensive content provider to push around distributors like DirecTV.

DirecTV was acquired by AT&T in 2015 for a total valuation of $67 billion. Three years ago, the telco sold majority control of DirecTV to private equity group TPG for an enterprise value of just $16 billion. Satellite TV has been losing subscribers for years, but unlike cable TV providers, DirecTV doesn’t have a broadband business to balance out changes in video consumption.

With a shrinking TV audience, Disney must charge as much as possible for every remaining subscriber to traditional linear pay TV. For example, its flagship ESPN has the highest affiliate fee, at about $9 per subscriber. In the most recent quarter, affiliate fee revenue fell 2 percent, while subscriber growth fell 8 percent, while rates rose 6 percent.

The current standoff between DirecTV and Disney has somehow become even more existential. As Lex recently discussed, a federal court shut down a joint sports streaming venture formed by Disney, Fox and Warner Bros. Discovery. The judge said the bundling practices, which required distributors to accept and pay for multiple channels as a package from Disney and the content companies, were likely illegal.

Following the decision, DirecTV has told Disney that it will not pay for everything thrown into the pot with ESPN, but only for what it thinks ESPN is worth on its own.

Both sides are digging in, accusing each other of being unreasonable and hurting American consumers. The Labor Day timing for this now annual spat is ominous. The most important live TV content by far is the National Football League, which kicks off its ESPN schedule next Monday night. Last year, that was enough to force a compromise just before Monday Night Football. Don’t be so sure this year.

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