Updated with Viacom statement: Dish Network CEO Charlie Ergen still sees a potential “path” to a deal that would keep Viacom’s channels on the No. 2 satellite provider after midnight tonight. But he’s prepared to take them down, saying that small cable operators such as Suddenlink that dropped Viacom apparently “have done just fine” and “don’t regret the decision.”
“We’re prepared to move on as Suddenlink and others have done,” he told analysts in a conference call to discuss earnings.
Dish has other content ready to replace Viacom’s channels if they go dark.
Although the tone of his talks with Viacom became “more productive” over the weekend, “it’s not done yet and the devil’s in the details.”
“We’re not mad at them,” he added. “We enjoyed the relationship. The content is good content.” Dish also would “always overpay a little bit” to avoid disrupting its subscribers.
But “we wouldn’t overpay astronomically.” And he insists that he isn’t playing around. “If they go dark, they go dark…I’d rather spend my time with companies that are more forward thinking.”
Viacom says it’s “hopeful” that they can make a deal.
It adds, though, that since yesterday when it began to warn that its channels might go dark “hundreds of thousands of concerned subscribers have reached out to implore Dish to negotiate reasonable terms…. Based on year-to-date Nielsen data, our networks represent nearly one fifth of cable viewership on Dish.”
Ergen disputes that assertion about the size of Viacom’s audience on Dish.
“Seven years ago Viacom was stronger on our network than they are today,” the CEO says. Viacom doesn’t have must-watch sports, and kids’ programming — including on networks such as Nickelodeon — has become “a pretty diluted genre.”
He warned that Viacom could find itself in a similar position to Time Warner Cable, which has been unable to persuade most other distributors serving southern California to pay the price it wants for its SportsNet LA, which carries the Los Angeles Dodgers.
“There becomes a price you can’t pay,” Ergen says. “Once somebody drops, it’s almost impossible for the next negotiation because you have leverage.”
Dish also doesn’t have to worry about lost cash, if it loses Viacom: “We’re comfortable with our cash position one way or the other.”
Ergen calls traditional, linear television “a mature to declining business” generally struggling with lower viewership. “There’s a whole generation either not paying for TV or paying for Netflix, or [Amazon] Prime” that he hopes to attract through the $20 a month Sling TV streaming service.
Analysts are divided about whether Dish and Viacom will find common ground.
MoffettNathanson Research’s Craig Moffett says that they’ll probably make a deal, and the tough talk is just a “sideshow”
Evercore ISI’s Vijay Jayant estimates that Dish pays as Viacom as much as $400 million a year for its programming. “While Dish will save these costs in case there is no agreement, it will also lose subscribers at a higher pace initially than in a scenario where there is a deal,” he says.
But BTIG’s Rich Greenfield says it’s significant that Dish held its call with analysts just before the deal deadline with Viacom. (Ergen acknowledged that “it’s no coincidence the conference call is today.”)
“The only logical conclusion we can come up with is that Dish has already made up its mind that a deal with Viacom is not achievable,” Greenfield said before the call. He predicted that Ergen would use the call “to set the investor/press messaging for the new realities facing the [pay TV] bundle. Investors should be prepared for an Ergen manifesto” about the declining value programming that’s also available online.
Nomura Securities’ Anthony DiClemente figures that Viacom could lose $1.1 billion a year, evenly divided between drops in affiliate fees and ad sales, without Dish’s nearly 14 million subscribers. That would result in an $890 million drop in operating income, and a cut of as much as $1.60 from earnings per share.
In addition to the dispute with Viacom, Dish has locked horns with NBCUniversal over carriage of NBC and Telemundo stations the programmer owns in markets including New York, Los Angeles, Chicago, Dallas, and Miami as well as pay TV services including USA, Syfy, Bravo, CNBC, and MSNBC.
Since its owner, Comcast, promised the FCC in 2013 as part of the NBCU deal that it would engage in good faith negotiations with competitors “we’re confident customers will be able to get a fair deal” either through negotiations or arbitration.
Ergen also says he’s still talking to Disney about the possibility of adding ESPN to Sling TV’s new multi-stream offering.
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