Customers lose again as satellite TV operators take similar orbits

by Parks Associates | Jul. 11, 2012

By Jim O’Neill, Parks Associates Research Analyst

DirecTV is the latest operator to dig its heels in a carriage fee battle. This time, Viacom, and its 26 channels on the operator’s lineup, is the protagonist. The tune may have changed, but the song remains the same: DirecTV claims Viacom is asking for an unreasonable increase in carriage fees; Viacom, of course, claims big traffic numbers and says it’s simply trying to bring DirecTV in line with the prices the content owner charges other customers.

In a blog post, Viacom said it had been negotiating with DTV “for months” and had offered the operator an extension beyond Tuesday’s midnight deadline, but “despite our best efforts, DirecTV has rejected all of our proposals to renew our agreement.” And, Viacom said, DTV’s counter proposal came in at “a lower rate than Viacom receives from any other distributor in the industry.”

The channels, including Nickelodeon, MTV, Comedy Central, BET, VH1, CMT, Spike TV, TV Land and more are now dark for DirecTV subscribers. So, no deal, no "Dora," "SpongeBob," "Teen Wolf," "106 & Park," or "Daily Show," no Colbert, and no Snooki.

“Our agreement with DirecTV is seven years old – ancient by the standards of the ever-evolving media industry,” Viacom said in its blog post. “Which means that DirecTV has enjoyed way below market rates for Viacom’s networks for a very long time.”

DirecTV, meanwhile, had a very different take on the issue.

In a video on DTV’s website, CEO Mike White said Viacom’s increase would see customers paying 30 percent more of their bill for its content, “That’s an extra $1 billion for the exact same channels you already receive,” White said. “We think that’s unreasonable. At the very least, we think Viacom should be willing to give your family the choice to pay for only those networks you watch… Viacom continues to insist on an all or nothing approach.”

White said the two sides will work a deal out, “we always do,” he said. In the meantime, DTV is directing customers to online sites for the missing programming.

Viacom, meanwhile, is directing viewers to www.whendirectvdrops.comor on Facebook www.facebook.com/WhenDirecTVDrops.

Last month, DISH Network had a similar showdown with AMC Networks. It, too, drew the line at having to carry “low-rated channels like IFC and WE tv to access a few popular AMC shows,” saying it just wasn’t “a good value for our customers.”

The two satellite providers seem to be in a similar orbit: endorsing à la carte… at least for themselves. But will that à la carte model eventually trickles down to their customers? Not likely.

This year has seen some five-dozen “blackouts” caused by retransmission or carriage fee battles, and there’s still more than five months to go in the year, guaranteeing that a rather dubious record will be set for 2012. There's no doubt the playing field, in terms of the value of video, is changing rapidly. Blame that on multiscreen delivery and over-the-top plays, and the balance operators and content owners are struggling to find in what that access should cost.

But the public battles operators and content owners are carrying on isn’t good for the industry, which in the eyes of consumers already is overflowing with fat cats. And, dropping channels as a bargaining chip is more punishment for those same consumers, who already feel like they’re paying too much for services.

This is a bad road to go down, and it’s likely to get worse before it gets better. For pay-TV customers, the liklihood of lost channels seems to be growing.

Stay tuned.



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