The business strategies of television distributors and programmers, including the bundling of channels and the online streaming of TV shows, were back under the microscope on Tuesday because of a contract dispute between two of the biggest such companies, DirecTV and Viacom.
On Monday night and into Tuesday morning, the dispute was publicized by both sides, first by Viacom, which warned DirecTV customers that they could lose access to Nickelodeon, MTV, Comedy Central and its other cable channels early Wednesday morning because contract talks with DirecTV had “reached an impasse.” DirecTV, in turn, said in a statement that it had offered Viacom “increased fees for their networks going forward; we just can’t afford the extreme increases they are asking for.”
In YouTube videos and blog posts, Viacom used characters from some of its most popular franchises, like “SpongeBob SquarePants” and “Jersey Shore,” to persuade fans to register their complaints with DirecTV. “No Daily Show, no Colbert, and no Snooki,” one of its Web sites warned.
On Tuesday evening, neither company publicly commented on the status of the contract negotiations, suggesting that a channel blackout was still possible after midnight Eastern time on Wednesday.
Fights over programming fees crop up from time to time; this one involves 17 channels and affects almost one-fifth of the households that subscribe to cable or satellite television in the United States — 20 million total.
Some of the 17 channels are well known among customers: Nickelodeon, MTV, VH1, BET, CMT, TV Land, Comedy Central, Spike. But some of the others bundled with them are not, including Nick@Nite, Nick Jr., TeenNick, NickToons, VH1 Classic, Logo, Tr3s, Centric and Palladia.
Programmers have traditionally sold channels to distributors this way, in a big bundle, but as distributors try to resist price increases, they are increasingly challenging this strategy in a public way.
“Programmers like Viacom typically won’t allow anyone to buy their channels individually, but we hope to change that,” DirecTV said in its statement on Tuesday morning. “We currently pay them hundreds of millions of dollars every year already, and if Viacom thinks their networks are worth a billion more, then you have to be able to select what’s most important in your own living room. It’s your money, so you should be able to decide.”
The debate about bundling comes as the practice is being examined by government regulators and lawyers for evidence of anticompetitive behavior. Some regulators are concerned that the practice inhibits innovation by online video upstarts and other companies.
One of DirecTV’s competitors, the Dish Network, spoke out about bundling in a different way last month when it announced that it was taking three channels owned by AMC Networks — AMC, IFC and WE TV — off its television lineup. It said at the time, “AMC Networks requires us to carry low-rated channels like IFC and WE to access a few popular AMC shows. The math is simple: it’s not a good value for our customers.”
That said, distributors like DirecTV and Dish generally do not want to sell channels on an à la carte or individual basis to customers. They just want more control over what they put in the packages they sell to customers.
Both DirecTV and Dish, in their separate spats, have also pointed out that some popular cable programming is now available on the Internet on a time-delayed basis. That is a big change from 2005, the last time Viacom and DirecTV signed a big carriage contract. On Tuesday, DirecTV promoted a tool, “Other Ways to Watch,” that linked to Web sites where Viacom-owned programs are available.
Analysts noted that DirecTV may feel emboldened by the fact that Nickelodeon has suffered from some ratings weakness in recent months. The channel remains, however, the most-watched cable network among DirecTV customers, according to Viacom.
Notwithstanding the current fights, a vast majority of negotiations between programmers and distributors are never even publicized. The last public feud between Viacom and a distributor was at the end of 2008, when the company warned Time Warner Cable customers of a possible blackout starting on New Year’s Day. But the two companies came to a new deal without any interruption in programming — the most common outcome in cases like this one.