THIS IS AIMED AT DIRECTV OWNERS LIKE MYSELF
DirecTV customers may lose access to Viacom’s 17 television channels, including Nickelodeon, MTV and Comedy Central, at the end of the day on Tuesday because of a dispute between the two companies.
The blackout, if it happens, would affect DirecTV’s 19.9 million customers in the United States — almost one-fifth of all the households that subscribe to cable or satellite television across the country. It is the latest in a series of fights over the fees paid by distributors like DirecTV for bundles of channels owned by programmers like Viacom. Earlier this month customers of one of DirecTV’s competitors, the Dish Network, lost access to the channels AMC, IFC and WE TV.
The fight between DirecTV and Viacom was publicized late Monday night by Viacom, when it issued a statement that negotiations for a carriage contract had “reached an impasse.” Viacom asserted that “DirecTV refuses to consider a fair deal that recognizes the value of Viacom programming.”
DirecTV, in turn, said early Tuesday morning that it had offered Viacom “increased fees for their networks going forward; we just can’t afford the extreme increases they are asking for.” DirecTV characterized Viacom’s request as a 30 percent increase, equivalent to “more than a billion dollars extra.” Viacom countered by saying that the current distribution contract is seven years old.
Both companies said the blackout would take effect Tuesday night at midnight Eastern time if an agreement is not reached before then. Meanwhile, both companies are trying to rally support for their side by attacking the other, a typical tactic in these fights.
Some of the threatened channels are very well-known among customers: Nickelodeon, MTV, VH1, BET, CMT, TV Land, Comedy Central, Spike. But some of the others are not. Those include Nick@Nite, Nick Jr., TeenNick, NickToons, VH1 Classic, Logo, Tr3s, Centric and Palladia.
Programmers have historically sold channels to distributors this way, in a bundle, but as distributors try to resist price increases, they are increasingly challenging this strategy in a very public way.
“Programmers like Viacom typically won’t allow anyone to buy their channels individually, but we hope to change that,” DirecTV said in a statement about the dispute with Viacom. “We currently pay them hundreds of millions of dollars every year already, and if Viacom thinks their networks are worth a billion more, then you have to be able to select what’s most important in your own living room. It’s your money, so you should be able to decide.”
That said, distributors like DirecTV generally don’t want to have to sell channels on an “a la carte” or individual basis to customers. They just want more control over what they put in the packages they sell to customers.
The debate about bundling comes at a time when the practice is being examined by government regulators and lawyers for evidence of anticompetitive behavior. Some regulators are concerned that the practice inhibits innovation by online video upstarts and other companies.
Dish Network spoke out about bundling in a slightly different way last month when it announced that it was taking AMC, IFC and WE TV off its television lineup. It said at the time, “AMC Networks requires us to carry low-rated channels like IFC and WE to access a few popular AMC shows. The math is simple: it’s not a good value for our customers.” It pointed out, as DirecTV did on Tuesday morning, that some popular cable programming is also available on the Internet on a per-episode basis. DirecTV set up a tool, “Other Ways to Watch,” that links to Web sites where Viacom-owned programs are available.
The current fights mask the fact that the vast majority of negotiations between programmers and distributors are never even publicized.
The last public feud between Viacom and a distributor took place at the end of 2008, when the company warned Time Warner Cable customers of a possible blackout starting on New Year’s Day. But the two companies came to a new deal without any interruption in programming.
Some analysts have recently suggested that Viacom is vulnerable to another public feud now because of sagging ratings at Nickelodeon, its flagship channel. Weakness at Nickelodeon has been a center of attention for the better part of a year. For a long time, Todd Juenger of Bernstein and Company wrote in a note to investors in mid-June, “it has been inconceivable that any distributor could drop Viacom’s networks, mostly because of Nickelodeon.” But because of the ratings trouble, it’s no longer inconceivable, it’s “improbable,” he wrote, calling that “a significant difference.”
Mr. Juenger predicted that the market reaction to a distribution dispute with Viacom would be “swift and severe,” though he cautioned that he didn’t know if it would happen in weeks, months or years, since the expiration dates of distribution agreements are kept secret.
On Tuesday morning, in an e-mail message to clients alerting them to the DirecTV dispute, he wrote, “It happened in weeks.”
The contract between DirecTV and Viacom expired on June 30, but was extended 10 days as negotiations progressed.
DirecTV, for its part, tried to downplay the significance of the possible blackout of programming by noting the time of year when it could occur. “Kids are off school and headed outdoors,” it stated on one of its Web sites Tuesday morning, “the Summer Olympics are on the horizon, and many of us are on vacation.” Oh, and “Viacom doesn’t have all that much original programming this summer.” The distributor correctly noted that most blackouts, when they do happen, do not last very long, since customers pressure the companies involved to come to a new agreement.