Sept 4 (Reuters) - What began as routine haggling over

the rates satellite TV provider DirecTV would pay to distribute

Walt Disney's ( DIS ) television networks is turning into a

referendum on the future of bundled programming, executives and

experts said.

DirecTV's current public battle with Disney ( DIS ) has led to 11

million DirecTV customers losing access to ESPN ( DIS ) in the middle of

the U.S. Open tennis tournament and a week before the New York

Jets are scheduled to meet the San Francisco 49ers on "Monday

Night Football." The dispute is taking place against the

backdrop of a competing plan by big media companies Disney ( DIS ), Fox

and Warner Bros Discovery ( WBD ) to launch a streaming

video joint venture devoted to sports, called Venu Sports.

The service, which had been scheduled to debut in August,

would combine the breadth of the media companies' live sports

programming. The launch was temporarily blocked by a court

injunction as part of a lawsuit filed by sports streaming rival

FuboTV ( FUBO ) accusing the media companies of anticompetitive behavior.

DirecTV is demanding Disney ( DIS ) give it the flexibility to offer

smaller packages, some without pricey sports channels to slash

the cost it has to pay Disney ( DIS ) and how much consumers need to pay

for its TV packages.

"This is not a run-of-the-mill dispute. This is not the kind

where people are haggling over percentage points on the rates,"

DirecTV Chief Financial Officer Ray Carpenter said on Tuesday in

an analyst briefing. "This is really about changing the model in

a way that gives everyone confidence that the industry can

survive."

Justin Connolly, Disney's ( DIS ) president of platform

distribution, told Reuters in an interview late last week that

the media company has proposed multiple options to DirecTV,

including one sports-centric package that would combine ESPN ( DIS ) and

the ABC broadcast network.

"The content we deliver to them is incredibly relevant to

their subscriber base," Connolly said. "DirecTV grew up around

the notion of high-quality video, with a sports-leading edge to

it. Ninety percent of their subscribers engage with our content

on a monthly basis. We want to continue to serve those

customers."

Connolly has said Disney ( DIS ) is not opposed to providing pay TV

consumers different options and packages. But it also wants

broad distribution for its content.

Distributors like DirecTV and programmers such as Disney ( DIS )

have bickered for decades over rates as the cost of television

packages have soared.

What has helped prop up the TV industry is the decades-old

practice of "bundling," or requiring pay TV distributors to pay

for and carry less-viewed networks, such as Freeform, to gain

access to the prized programming of ESPN ( DIS ). Contractual terms also

specify how broadly a distributor makes this content available

to its subscribers.

Sports have historically provided a bulwark against the

decline of the pay TV industry, continuing to attract viewers

even as cable and satellite TV distributors shed subscribers.

But as viewers migrate to streaming, sports has followed.

Marquee events, such as the just-ended Olympics, have moved to

streaming, along with professional sporting contests from the

National Football League and the National Basketball

Association.

Venu threatens to further accelerate the decline of pay TV.

"A successful launch of Venu could have spelled the death

blow to the traditional linear pay TV bundle," wrote

MoffettNathanson's Craig Moffett, using the industry term for

traditional TV broadcasts where programs are scheduled.

In court documents, Venu's media partners acknowledged the

sports streaming service could siphon two-thirds of its

customers from cable and satellite TV.

The nation's largest pay TV company, Charter Communications ( CHTR ),

won some concessions last year from Disney ( DIS ). It negotiated for a

skinnier package of programming and gained rights to distribute

Disney+, Hulu and ESPN+ to its Spectrum TV customers who want

access to streamed content.

DirecTV, though, is purely in the business of delivering

video into consumers' homes.

"We need something that is going to work for the long-term

sustainability of our video customers," Carpenter said. "So, the

resolve is there."