As Mike Sorrentino, star of MTV's
"Jersey Shore," would put it, DirecTV and Viacom have a situation
here.
DirecTV dropped more than a dozen cable
networks owned by Viacom including MTV, Nickelodeon, BET and Comedy Central on
Tuesday night after the satellite distributor was unable to reach a new fee
arrangement with the media giant to continue carrying its channels. Although
the two sides are continuing to negotiate, analysts said the dispute could drag
on for weeks.
"I think it's going to take a
while," said Nomura analyst Michael Nathanson. "It shouldn't have
gotten to this level and it did."
That means almost 20 million DirecTV
subscribers around the country may have to get used to life without "Dora
the Explorer," "Snookie and Jwoww,""The Daily Show"and
other popular programs from Viacom's networks.
At issue are price increases Viacom wants
to extract from DirecTV to keep carrying its cable channels.
"Viacom is pushing DirecTV customers
to pay more than a 30% increase, which equates to an extra $1 billion,"
Derek Chang, DirecTV's executive vice president of content, strategy and
development, said in a statement. Chang argued that the increases are out of
line given declining ratings for many of Viacom's channels over the last year,
including the kids network Nickelodeon.
Chang said the company was willing to keep
the popular channels on its systems while talks continued but couldn't get
permission from Viacom.
"Let's be clear, Viacom took these
channels from DirecTV viewers," Chang said.
Viacom countered that the increase it seeks
is "a fair deal that amounted to an increase of only a couple pennies per
day per subscriber."
Neither side would specify the costs of
carrying each channel. But according to industry consulting firm SNL Kagan the
price tag for Viacom's channels ranges from about 50 cents per subscriber per
month for Nickelodeon to 16 cents per month per subscriber for Comedy Central.
The most expensive cable channels are ESPN, which costs more than $5 per
subscriber per month, and TNT, which runs about $1 per subscriber per month.
Nomura's Nathanson said he believes
DirecTV's previous deal was "very favorable" and Viacom is trying to
get rates closer to what other big distributors are paying.
Price is not the only issue for DirecTV.
The satellite broadcaster is also unhappy with how much content Viacom puts
online for free. Pay TV distributors such as DirecTV are pressuring programmers
to avoid putting a lot of content online for free out of fear that consumers
could eventually decide to cut the cord to their pay TV service.
"This will be a big source of
push-back from the distributors," said Sanford C. Bernstein analyst Todd
Juenger, who added that he finds it "baffling" how much content
Viacom gives away free online.
On Wednesday, Viacom stopped free online
offerings of some of its shows including Comedy Central's "The Daily
Show" and "The Colbert Report."
Carole Robinson, a Viacom spokeswoman, said
the company had "temporarily slimmed down our offerings as DirecTV markets
them as an alternative to having our networks."
Upset consumers took to Facebook and
Twitter to bash both companies.
"Both are putting the customer in the
middle, work it out or you both will lose," Michele Godhigh wrote on a
Facebook page Viacom set up to state its case against DirecTV. "It's sad
that we have to suffer because of your antics."
Although feuds between programmers and
distributors are common, it is rare for channels to get pulled. Once that
happens, there is a tendency for both sides to dig in their heels.
Viacom and DirecTV each have potential
headaches the longer the dispute goes on. Viacom could see its ratings take a
hit from the loss of DirecTV, while the satellite company has to worry about
its subscribers looking for other options to get their favorite channels.
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