Direct TV and Viacom Dispute: Why SpongeBob SquarePants, The Daily Show, and Stephen Colbert Are Still in the Dark

It’s been over week since DirecTV customers have seen SpongeBob Square Pants, The Daily Show, much less the smiling face of Stephen Colbert. Once again, negotiations hit a brick wall for both sides leaving little light at the end of the Viacom blackout tunnel.

The epic messaging war between the two media giants ramped up late Wednesday when both sides once again walked away from the negotiating table leaving millions of parents explaining to their children why they cannot watch SpongeBob this afternoon. The latest twist in the grand Viacom bargain is a little known channel, Epix. 

What the heck Epix?

Epix is a relatively new movie channel formed in 2008 by entertainment giants Paramount Pictures, MGM, and Lionsgate Entertainment after negotiations on new film output fell through with Showtime. The sticking point was compensation over movies owned by the studios that would be aired on Showtime channels.

The studios launched Epix in 2009 with exclusive rights to Paramount films starting with the 2008 new releases along with rights to MGM, United Artitists, and Lionsgate content starting in 2009. They also hold the after release exclusives to the complete film libraries owned by all of the studios involved in the partnership. 

MTV Networks, owned by Viacom, provides operational, marketing, and affiliate support to Epix. 

The first content provider to carry Epix’s flagship station was Verizon FiOS. Subscribers received a ‘free week-end’ and signed up for $9.99 per month if they decided to keep the channel. 

Before the end of their first year, Epix expanded from the single premium station to a hybrid of premium/basic channels, secured an exclusive 20 movie first run deal with Samuel Goldwyn Films, along with a 22 movie first run deal with indie film studio Roadside Attractions.

In addition to signing Verizon Fios and the initial first run exclusives, Epix has secured channel placement on Cox Communications, Mediacom, Dish Network, Charter Communications, and most recently Suddenlink Communications with an average price point of $10.

Since the launch three years ago, Epix has expanded from just one channel to four, and entered into pay-per-view boxing, music, video streaming, HD, and on-demand services. 

Not all content carriers jumped on the Epix bandwagon. Prior to the Epix launch, Comcast, Cablevision, and DirecTV announced that would not carry Epix on their systems. In a statement to investors, DirecTV’s interim CEO Larry Hunter said, “We think there are enough of them out there already, we don't see the value of adding another movie channel."

It’s not uncommon for programmers to include a new channel in the mix during negotiations. It provides visibility to the channel, expands the programming options for carriers and customers, and, if the channel is successful, provides a new revenue stream for all parties involved. If the channel is not successful, it becomes a boat anchor for all parties and the customer ends up footing the bill for yet another channel they will never watch.

It’s not really clear if Epix became the latest sticking point so the messaging war continues and DirecTV maintain that they are trying to keep costs down. Once again, mommy and daddy may have to tell their little ones that the reason why SpongeBob isn’t on the air right now is because many people decided to buy two pounds of ground chuck instead of adding to their satellite bill.

At the rate the Viacom and DirecTV are going, the messaging war might just rival that of Congress.