Viacom is warning subscribers to AT&T’s DirecTV service that their access to the company’s cable networks including BET, Comedy Central, MTV, and Nickelodeon may end unless a disagreement over fees can be resolved before their contract expires Midnight Friday.
According to a memo from Viacom CEO Bob Bakish that was distributed to the press, AT&T is “abusing its new market position by favoring its own content -- which significantly underperforms Viacom’s -- to stifle competition.” The memo goes on to accuse the telecom giant of wanting to charge its customers higher prices for an "inferior" product.
Viacom started a public relations campaign aimed at DirecTV’s subscribers with some of the company’s biggest stars including Trevor Noah of The Daily Show. It also is running a crawl on its channels on the bottom of the screen of DirecTV subscribers and has launched a website called http://www.keepviacom.com/.
“Viacom has made many offers to AT&T-DirecTV that would: Keep these channels on the air; Enable AT&T-DirecTV to lower bills now (and) give consumers more choice,” Keepviacom says. “Rather than work on their customers’ behalf, AT&T-DirecTV continues to raise prices while taking away channels.”
AT&T, for its part, doesn't want customers to lose access to Viacom's channels but believes that it needs to take a hard line on the media company's fees. The telecom giant was "disappointed" that Viacom chose to put DirecTV customers in the middle of negotiations.
"The facts speak for themselves: several of Viacom’s channels are no longer popular," according to an AT&T statement. "Viacom’s channels in total have lost about 40% of their audience in the past six years. Viacom is a serial bad actor in these business negotiations and has repeatedly used these tactics with other distributors."
Both companies are under pressure to strike a deal. As Variety notes, if Viacom significantly cuts the retransmission fees that it charges DirecTV, other pay-TV providers would demand similar treatment. AT&T, on the other hand, needs as many distribution partners as it can get to pay down its heavy debt load from its $67.1 billion acquisition of DirecTV in 2015.
More than 1 million subscribers dropped DirecTV in 2018 thanks to the rise of cord-cutters and increased competition. Interest in the company's DirecTVNow "skinny bundle" also is starting to wane. Customer defections will increase if the DirecTV can't offer Viacom's channels.
As advertising spending shifts online, retransmission fees are becoming increasingly important for media companies. Market research firm Kagan expects them to hit $12.8 billion in 2023.
Disputes over retransmission fees are becoming increasingly contentious.
Subscribers to DirecTV’s main rival DishNetwork haven’t had access to HBO and Spanish language network Univision for months after the satellite provider failed to come to term on new distribution agreements. As a result, nearly 1 million net customers dropped Dish last year. HBO is part of AT&T’s WarnerMedia business it acquired last year in its $85.4 billion acquisition of Time Warner. More people are expected to drop Dish when the new season of Game of Thrones starts in April.
“We have successfully renewed a series of distribution relationships representing more than half our subscriber base over the last two years and have not had a disruption in our service since 2014,” Bakish wrote. “While we continue to make every effort to reach a new carriage agreement, AT&T’s unwillingness to engage in constructive conversations, unfortunately, could force a disruption in service.”
Updates story to add comments from AT&T.
