DirectTV and MTV’s parent company, media giant Viacom, have been in intense contract negotiations to renew DirectTV’s content contract. Negotiations stalled this Tuesday and DirectTV pulled all Viacom channels from their line-up. At issue are programming fees (also called carriage fees) to ensure DirectTV can carry all of Viacom’s programming for the next seven years.
In my article, Blame Netflix and Hulu: 6 Reasons Your Cable Bill Just Went Up, I listed programming fees as the top two reasons for increases in your cable bill, and satellite providers like DirectTV are not immune to the challenge.
In the atypical viewer battle, each side has launched their own messaging campaigns. DirectTV released a statement on their website stating, "Viacom has spent the day trying to convince the public that DIRECTV is willingly removing channels like MTV, Nickelodeon, Comedy Central, TV Land and Spike from our customers' homes tonight at midnight."
Viacom’s response: "DirecTV is throwing around some big numbers that are misleading. Here's the truth: Viacom is asking DirecTV for an increase of a couple of pennies per day per subscriber. That's far less than DirecTV pays other programmers with fewer viewers than Viacom. Viacom has always been open to negotiating and hopes to get a deal done."
The reality is the deal that just expired was signed before the recession. DirectTV factored the subscriber costs in their business model to keep their customers’ bills at a reasonable rate. They also use anticipated rate projections for new promotions as the contract came to an end. Viacom won’t agree to those terms.
The additional challenge traditional content providers have is that content is rapidly moving to an online solution. In his article, This is Why Netflix and Hulu Will Eventually Kill Cable Television, PolicyMic Pundit Logan Nee explores the impact over-the-top providers have had on the cable industry. This has bled into the satellite domain giving content providers, like Viacom, greater leverage during tense negotiations with an alternative that bypasses the traditional middle man with online alternative on Hulu.
When this stand-off will end is unknown. Three things are certain: 1) Millions of DirectTV customers are now left without their MTV; 2) Viacom’s vision has given the new millenials an online alternative; and 3) The long term contracts are starting to roll off and starting 2013 inflation will hit your cable and satellite bill.
If you want to keep your costs down don’t call DirectTV. Instead, call Viacom and demand your MTV on DirectTV.