Viacom Stock Drops 5% On DirecTV Carriage Angst, AT&T Slips A Fraction – Update


UPDATED with closing stock prices. Shares in Viacom have dropped to their lowest level in 2019 to date while AT&T’s are down just a fraction as the companies gird for carriage battle.

Viacom on Tuesday began warning viewers of Comedy Central, Nickelodeon and other networks that the channels could soon go dark on DirecTV and U-Verse, the major pay-TV systems owned by AT&T. The current agreement for carriage expires at midnight ET on Friday.

Viacom’s stock price fell 5.5% to close at $26.01. AT&T declined a half-point to $30.51.

In the dueling rhetoric that typifies carriage disputes, Viacom accused AT&T of unfairly favoring WarnerMedia networks, an echo of complaints from other media companies that opposed the $81 billion Time Warner acquisition. AT&T responded by calling Viacom a “serial bad actor in these business negotiations.”

Analysts have been split about the impact of a carriage fight. Many see Viacom as vulnerable, given the shifts in TV viewing habits and the ongoing erosion of its networks’ linear ratings. The stock took a hit last week when AT&T re-packaged the DirecTV Now skinny bundle service, rolling out a new basic tier that ditches Viacom, Discovery and AMC Networks channels.

Other voices on Wall Street, though, point to the uncertain future at AT&T, which is heavily in debt and confronting steep subscriber losses at the internet-delivered DirecTV Now service, which was seen as a beacon of hope. DirecTV is the No. 1 satellite operator but its core business is widely acknowledged to be in secular decline.

In a research note last week about the DirecTV Now situation, “Credit Suisse analyst Doug Mitchelson wrote, “We believe media stocks certainly over-reacted relative to the specific financial impact of the DirecTV Now changes.” Longtime Viacom bull Rich Greenfield of BTIG wrote a blog post casting doubt on the strategy at AT&T. “DirecTV dropped Viacom networks back in 2012 and it did not end well for DirecTV, with competitors seizing on the opportunity to capture market share at DirecTV’s expense,” he wrote.

Carriage negotiations are playing out on a different stage than in 2012, however, given the wide availability of many direct-to-consumer streaming options. The overall number of pay-TV subscribers recently slipped below 90 million in the U.S., its lowest level since 2007, according to the latest survey by Leichtman Research Group.

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