Gene Scallop here with breaking news! Here’s what broke this morning!
The cable TV protest is over! Direct TV and Viacom have a new carriage agreement for all of its cable customers. As a reward, the satellite provider has restored all 26 Viacom channels including Nick. Angie, what’s the good news and bad news?
Angie Angelfish (via Dateline Hollywood)- DirecTV’s 20M customers have their MTV – and 16 other Viacom channels – again. The companies said this morning that they’ve resolved their 10-day contract dispute, which took more channels from more consumers than any other fight so far between a pay TV distributor and programmer. That will come as a relief to DirecTV customers who are fans of channels including Nickelodeon, Comedy Central, BET and Spike. Investors also will be glad to see an end to what many feared could have become an extended black out that might trash both companies’ earnings. In addition, Hollywood moguls will be pleased: Several have told our Nikki Finke that they’ve found it hard to promote movies while Viacom’s youth-oriented channels have been dark in so many homes.
The companies provided little information about the terms. Viacom says the deal is “long-term” and includes “an option [for DirecTV] to add the EPIX service to its entertainment offerings.” Viacom co-owns the premium movie channel with Metro-Goldwyn-Mayer and Lionsgate. DirecTV says EPIX carriage “is not required as part of the new agreement” — but that satellite customers will “gain the ability to see Viacom programming on tablets, laptops, handhelds and other personal devices via the DIRECTV Everywhere platform.” Viacom had been looking for a substantial increase in DirecTV’s payments coupled with high single digit percentage annual increases over the life of the deal.
The resolution comes less than two days after a Viacom exec said that negotiations had stalled, and that there was no end in sight to the showdown. Both companies were looking to send a signal to the marketplace: Viacom’s shareholders are counting on it to secure big increases in distributor payments at a time when ratings – and therefore ad sales – have steeply declined for channels including Nickelodeon and MTV. Indeed, DirecTV questioned the value of paying a higher price for Viacom’s channels as the audience declined. But DirecTV also needed to show that it would hold the line on programming costs. DirecTV EVP Derek Chang said the fight “serves notice to all media companies that bullying TV providers and their customers with blackouts won’t get them a better deal.” It’s especially sensitive to programming prices because video accounts for almost all of its sales. Cable operators often can compensate for additional programming expenses by raising prices for other popular services including broadband and phone connections.
Viacom appeared to have been hurt most by the impasse. Its shares fell 2% over the period. Live, full day ratings in the target demos for its channels were down 27% in the week that ended July vs the same week last year – the previous week, before the loss of DirecTV, they were -14%. But DirecTV, whose shares were off less than 1% in the 10 day period, could have suffered more long-lasting damage if the dispute dragged on. The fear was that fans of the Viacom services might begin to switch to Dish Network or cable – or simply not sign with DirecTV in the first place.
Here’s Viacom’s statement, followed by DirecTV’s:
All 26 Viacom Networks, Including Nickelodeon, Comedy Central, MTV, BET, CMT, Logo, Spike, TV Land, MTV2, VH1, VH1 Classic, Palladia, Nick Jr., Nicktoons, TeenNick, Tr3s and Centric, to Return to DIRECTV Immediately
NEW YORK, July 20, 2012 – Viacom today announced that the company has reached a long-term agreement to renew carriage with DIRECTV.
All 26 Viacom networks, including Nickelodeon, Comedy Central, MTV, BET, CMT, Logo, Spike, TV Land, MTV2, VH1, VH1 Classic, Palladia, Nick Jr., Nicktoons, TeenNick, Tr3s and Centric, will return to DIRECTV’s channel lineup immediately. As part of the overall carriage agreement, DIRECTV has an option to add the EPIX service to its entertainment offerings.
Viacom is extremely pleased to bring its programming back to DIRECTV subscribers, and thanks everyone affected by the disruption for their patience and understanding during this challenging period.
EL SEGUNDO, Calif., July 20, 2012 – DIRECTV has reached a new long-term agreement with Viacom to restore 17 channels (including Nickelodeon, Comedy Central, MTV, BET, Spike, CMT, TV Land and ten other channels) that Viacom had taken away from DIRECTV customers on July 10. Viacom has returned all affected networks.
Financial terms were not disclosed.
In addition to the channels’ return, DIRECTV customers will also gain the ability to see Viacom programming on tablets, laptops, handhelds and other personal devices via the DIRECTV Everywhere platform. Carriage of the EPIX movie channel is not required as part of the new agreement.
“We are very pleased to be able to restore the channels to our customers and thank them for their unprecedented patience and support,” said Derek Chang, executive vice president of Content Strategy and Development for DIRECTV. “It’s unfortunate that Viacom took the channels away from customers to try to gain leverage, but in the end, it’s clear our customers recognized that tactic for what it was.”
Chang added, “The attention surrounding this unnecessary and ill-advised blackout by Viacom has accomplished one key thing: it serves notice to all media companies that bullying TV providers and their customers with blackouts won’t get them a better deal. It’s high time programmers ended these anti-consumer blackouts once and for all and prove our industry is about enabling people to connect to their favorite programs rather than denying them access.”
The dispute helped generate significant public support from hundreds of thousands of customers and also, surprisingly enough, many high-profile DIRECTV competitors. The 850 small and independently owned local cable systems that make up the American Cable Association joined the anti-blackout chorus, as did Cox Communications, Time Warner Cable and Mediacom.
With the protest a success, it appeared that Direct TV had won the battle, which meant that Viacom paid the price for putting the negotiations in the wrong direction as Direct TV said it did. As a result, the company suffered a 27% ratings drop which you’ll see here:
The black out began on July 11, which means that Viacom networks didn’t have DirecTV’s 20M subscribers for five days in the week that ended July 15. During that week, there was a 27% drop in the total day live viewing for the target audiences of Viacom’s networks compared with the same period last year, according to a compilation of ratings data by Barclays Capital. The previous week the networks collectively were -14%. Those with the steepest year-over-year drops were Nick at Nite (-48.1%), Nickelodeon (-45.0%), VH1 Classic (-35.3%), Nick Toons (-34.8%), and CMT (-32.0%). Viacom’s more resilient channels were VH1 (-1.3%), Teen Nick (-2.5%), Comedy Central (-5.5%), BET (-13.0%), and TV Land (-18.1%).
The impact on DirecTV is hard to determine until it releases new subscription data. But its rivals smell blood. Comcast, Cablevision, and Dish Network are advertising for DirecTV subs to switch so they can continue to watch Viacom’s channels, BTIG analyst Rich Greenfield reports. While he doesn’t expect a lot of customers to jump just yet, “it will be very challenging [for DirecTV] to sign-up new subs with so many channels missing,” he says. And the impact on DirecTV could be long-lasting because customers will be “far harder to recapture given DirecTV’s lack of a broadband offering.”
How long will the fight last? Even the experts disagree. Barclays’ Anthony DiClements says that “a near-term resolution to the conflict is likely, given the value of Viacom’s programming, and the sheer number of networks at stake for [DirecTV] subscribers.” But Cowen and Co analyst Doug Creutz says he’s “concerned that the DirecTV carriage fight could persist for an extended period of time” — resulting in as much as 40% in lost earnings for Viacom “across the length of the blackout.”
With the dispute over, I hope Viacom can make up for lost ground since they lost the fight. So Direct TV fans, you can now see your favorite Nick shows again thanks to Direct TV and Viacom! Just in time to see the Super Spongy Square Games marathon leading up to 4 new SpongeBob episodes for your cable provider and for Direct TV viewers.
We’ll see you in the Sunday news brief with Fish Head. Gene Scallop saying, Catch you later!