Setting the stage for the next major pay-TV carriage battle, Viacom is rolling out ads across Comedy Central, Nickelodeon and other networks warning viewers that DirecTV and U-verse soon could be pulling the plug on its channels.
Viacom and AT&T’s DirecTV and U-verse systems are nearing the deadline of their current carriage agreement, which expires at midnight ET on Friday (9 p.m. PT). The saber-rattling follows AT&T’s decision last week to drop Viacom networks from the basic tier of its new DirecTV Now packages.
In a statement, Viacom said it has “made a series of offers that are good for consumers and good for AT&T” but got a cool reception on the other side of the negotiating table.
Like Dish Network and other rivals of AT&T, Viacom is blaming the dispute in part on the makeup of the newly constituted AT&T. The telecom giant owns the No. 1 traditional satellite operator, DirecTV; cable operator U-verse, which has just shy of 4 million subscribers; and WarnerMedia’s potent mix of TV and film content. During the 16-month legal showdown with the government, which sued to try to block AT&T’s $81 billion acquisition of Time Warner, competitors argued that the combined company would use distribution and programming assets as a weapon to harm rivals and, therefore, customers.
“Unfortunately, AT&T is abusing its new market position by favoring its own content – which significantly underperforms Viacom’s – to stifle competition,” Viacom’s statement continued. “AT&T-DirecTV’s behavior is also consistent with a recent pattern of gouging their customers by charging them higher prices for an inferior product with fewer channels. Especially troubling, AT&T-DirecTV is marginalizing diverse audiences in its new DTV packages and threatening to do the same with their existing products.
“Viacom is committed to developing strong relationships with our distribution partners,” the statement adds. “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. 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.”
AT&T hit back at Viacom in a statement, ratcheting up the rhetoric as is often the case in high-profile carriage fights.
“We’re disappointed to see Viacom put our customers in the middle of their negotiations. We are on the side of customer choice and value and want to keep Viacom’s channels in our customers’ lineups. We hope to avoid any interruption to the channels some of our customers care about,” AT&T’s statement said. “The facts speak for themselves: several of Viacom’s channels are no longer popular. 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. Our goal is always to deliver the content our customers want at a value that also makes sense to them. We’ve always fought to get the best deal for our customers, delivering the content they want at a great value. We’ll continue to fight for that here.”
At the same time it is warning customers, Viacom is also trying to buck up internal morale. Last week, when DirecTV Now dropped Viacom from a basic tier of its skinny bundle, the company’s stock dropped (along with those of Discovery and AMC Networks) and questions again were raised about the company’s trajectory. The rebuff came after two years of progress by CEO Bob Bakish.
The new leader has set about repairing the distribution relationships that had deteriorated badly under predecessor Philippe Dauman. Despite waning ratings and a transforming TV bundle environment, Dauman took a hyper-aggressive negotiating stance and the result was a series of pitched and costly battles. Viacom and Suddenlink, which is now part of Altice, had a blackout that lasted three years.
Here is the full text of Bakish’s memo to employees:
Over the past two years, we’ve made incredible progress in strengthening and evolving our domestic distribution business.
Not only have we secured more carriage for our brands with existing partners and new, we’ve also expanded the definition of partnership to include new elements, like advanced advertising and co-production arrangements. In the process, we’ve renewed and extended more than half of our subscriber base, securing deals with Altice, Charter, Comcast and others, to give audiences greater access to our brands, and more choice in how they consume our content – most recently in the Charter Essentials product, which Charter announced a few weeks ago.
In that same spirit of partnership, Viacom has been working to negotiate an agreement with AT&T to renew distribution of our channels on DirecTV and AT&T video services. We’ve made a series of offers that are both good for consumers and good for AT&T – giving subscribers more access to the Viacom channels they love, while enabling AT&T to lower subscribers’ bills and provide customers with a variety of packages and price points. Importantly, our offers would ensure that AT&T is able to continue serving the diverse audiences that prefer Viacom to any other cable programmer. And, consistent with our other recent distribution deals, we want to work with AT&T on new opportunities that go beyond traditional carriage.
Despite these efforts, AT&T continues to insist on unreasonable and extreme terms that are totally inconsistent with the market. Having recently acquired Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, who are growing increasingly dissatisfied with paying more for less.
Because of AT&T’s unreasonable position, today we began to warn subscribers that they may lose our channels when our contract expires on Friday, March 22. This would be our first disruption since 2014, so we remain hopeful that we can reach an agreement that fairly values the amazing entertainment brought to life by our brands, and by your talent, creativity and hard work.
I realize that many of you, and your families and friends may be AT&T-DirecTV subscribers. Please feel free to share a link to http://www.keepviacom.com, which will be updated with relevant news and information.
Of course, we’ll continue to update you as this situation develops over the next few days.
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