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DirecTV Wins War Against Viacom, but More Blackouts Ahead for Pay TV Customers


The availability of TV programs online will continue to be a sore point for cable operators.

MINYANVILLE ORIGINAL Last Friday, DirecTV (DTV) and Viacom (VIA) reached an agreement that finally ended the nine-day blackout of Viacom channels for DirecTV customers.

The exact details of the deal were not released, but it is believed that the new seven-year deal will see Viacom getting a 20% increase in fees from DirecTV, which will now pay more than $600 million a year to Viacom, compared to $500 million previously. This is less than the 30% fee increase that Viacom initially sought. DirecTV also does not have to carry Viacom's premium Epix movie channel, though it has the option to do so.

Both parties have said that the agreement reached was a fair one, but it seems like DirecTV was the winner of this confrontation according to most media analysts.

"The Viacom/DirecTV dispute may be remembered as a critical turning point in programmer/distributor negotiations. For the first time in memory, it was the distributor that won the public relations war," Bernstein Research's Todd Juenger and Craig Moffett said in a research note, adding that what Viacom received was "way below the market's and Viacom's expectations."

"More significant, perhaps, is the signal that DirecTV has sent to other programmers. By showing their willingness to take a blackout, and arguably winning the battle for the hearts and minds of their customers as a result, DirecTV may extract better terms from other programmers down the road," they concluded.

RBC Capital Markets analyst David Bank concurred, telling the Wall Street Journal that it was significant that DirecTV is not required to add Epix. That would have meant an "unequivocal victory" for Viacom, he said.

Wells Fargo's Marci Ryvicker also believes that DirecTV "may have won this battle….It is good for both companies that this is over, but we think leverage may have been with the distributor this time," he told Deadline.

Nomura Securities' Michael Nathanson was one of the few dissenters, telling Deadline, "This deal reinforces the power of Viacom's networks and brands, especially in the face of weak short-term ratings. It also helps set the template for future deals and debunks the bearish thesis of dropping any networks or not having enough clout over distributors given recent concerns over Nickelodeon ratings."

While customers of DirecTV may rejoice now that they can watch Viacom channels like Comedy Central and MTV once again, it looks likely that more pay TV blackouts are on the horizon.

A fundamental sticking point in the Viacom-DirecTV tussle -- the availability of Viacom shows online and how that impacts TV ratings -- could come up with Fox (NWS) and CBS (CBS), who are due to renegotiate their distribution agreements later in the year. Fox will be forging a new deal with Comcast (CMCSA) while CBS will work out agreements with DirecTV and Cablevision (CVC).

Free-to-air broadcast networks like CBS and Fox have been enthusiastic in making their shows available for free streaming online via their own websites or sites like, since they rely on advertising, not subscriptions, for revenue. This, cable operators argue, lessens the exclusivity and cheapens the value of the content they buy.

Dish Network's (DISH) still ongoing blackout of AMC (AMCX) is also tied to this issue, with certain AMC shows' past seasons being available online at venues like Netflix (NFLX).

Now that DirecTV has shown that it was able and willing to hold its ground against a content juggernaut like Viacom, it will not come as a surprise when Comcast, Cablevision, and other cable and satellite providers take a stand and oppose price increases and more bundling of network channels in future contract negotiations with content providers.

Twitter: @sterlingwong
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