Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: viacom | pain | directv | gain | subscribers

Viacom's Pain Won't Be DirecTV's Gain

viacom corporate logo symbol emblem on a computer screen

Mohamed Ahmed Soliman | Dreamstime.com

Tara Lachapelle, Bloomberg Opinion By Wednesday, 20 March 2019 03:52 PM EDT Current | Bio | Archive

Bitter contract negotiations between video-service providers like AT&T Inc.’s DirecTV and TV-network operators like Viacom Inc. almost always work out in the end because of their mutual interest in retaining subscribers. But what if one of those parties no longer necessarily shares that interest? 

This is one way in which AT&T’s takeover of Time Warner and the rising popularity of streaming apps have upended the media industry, leaving smaller companies like Viacom most vulnerable. I’m not saying AT&T wants to see its DirecTV service lose subscribers, but pruning the number of networks it offers in its packages could help the company save money and boost profitability. That’s important to AT&T right now as it tackles the debt load it took on for the $102 billion Time Warner transaction and shifts its focus to realigning those assets for online-video streaming, where its biggest competitors will be Netflix Inc. and Walt Disney Co. (On Wednesday, Disney completed its own $85 billion acquisition of 21st Century Fox Inc.)  

The carriage agreement with Viacom expires on Friday, putting its already struggling networks such as MTV, Nickelodeon, BET, Comedy Central and VH1 at risk of being dropped from DirecTV’s satellite service, which still had about 19 million customers as of December, after suffering more than a million defections last year. The dispute threatens to disrupt the work Viacom CEO Bob Bakish has done in the last two years to revive the business, and failure to reach a deal with DirecTV could be catastrophic. It would also mean Viacom loses its leg up in merger talks with CBS Corp. that are expected to begin soon. 

Already last week, the DirecTV Now streaming bundle dropped all of Viacom’s channels – and that of A&E, AMC Networks Inc., and Discovery Inc., too – while simultaneously raising prices. Add on the DirecTV squabble, and it’s been enough to put Viacom shares into a tailspin. The new, bigger AT&T is doing exactly what it told regulators it wouldn’t: asserting its power by raising prices and prioritizing the HBO, Turner and Warner Bros. assets it acquired over rival content. It’s why I wrote during the course of the Time Warner approval process that regulatory scrutiny was warranted and that we should have a debate over how much power one company should wield – rather than getting distracted by the speculation that President Donald Trump was meddling in the process because of personal grievances. (The New Yorker recently reported that Trump did, in fact, order the deal to be blocked, but the Justice Department still lost its case at trial and on appeal.)

Industry consolidation and the rise of streaming have resulted in the Balkanization of the TV industry, making it annoying, confusing and costly for consumers to configure their ideal set of TV subscriptions. This will only lead to more channel blackouts, as I wrote in November.

But despite all the posturing, there’s still a decent chance that DirecTV and Viacom ultimately reach an agreement. Even though Viacom’s networks have had steep ratings declines over the last few years, they help round out video packages because of their young and diverse audiences. As Disney starts preserving a lot of its best content for the soon-to-come Disney+ app, Viacom’s Nickelodeon and Nick Jr. stand out as an important offering for kids, a large segment that AT&T’s Cartoon Network can’t support on its own. Without MTV, Nickelodeon, etc., younger viewers are that much more likely to cut the cord.

DirecTV Now wasn’t making money and had to cut back. But as for DirecTV satellite, AT&T isn’t so foolish as to hasten its death when it’s such a significant source of cash flow for the company. (It’d be more likely to sell the division than to cut off its air supply.) Potential subscriber losses from dropping Viacom could be so large that they outweigh any reduction in programming costs. Plus, Viacom’s networks are relatively cheap, and some are key components of AT&T’s lower-end streaming product called Watch TV. 

Viacom may get through another carriage dispute by the skin of its teeth, but its problems aren’t going away. A handful of companies will soon dominate the media landscape.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

© Copyright 2024 Bloomberg L.P. All Rights Reserved.

AT&T can’t afford to drive away DirecTV subscribers, but their dispute shows the road ahead for Viacom will only get harder.
viacom, pain, directv, gain, subscribers
Wednesday, 20 March 2019 03:52 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved