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DirecTV-Viacom War Has One Loser: Customers

By Ian Kar on July 17, 2012 3:40 PM EDT 0

Viacom Headquarters
Viacom has removed their programming from DirecTV. (Photo: Kriston Lewis)
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DirecTV-Viacom dispute is affecting the consumers the most. (Photo: flickr.com / undoer)

Another fight between cable providers and the networks has led to a blackout of popular channels like Comedy Central, BET, MTV, and Nickelodeon.

The DirecTV and Viacom dispute has a pretty familiar story; one company wants more money, the other one doesn't want to give it (this makes the battle between AMC and Dish Network even more peculiar, since their fight isn't about fees but an unrelated lawsuit). According to reports, Viacom wants approximately a 30% increase in their current rates for DirecTV to have the privilege to show their programs. The problem is that, Viacom programming hasn't gotten more popular, its actually seen a decline in ratings. Therefore, DirecTV doesn't see the point in giving Viacom more money, however, they also can't manage without the channels that Viacom provides to DirecTV customers. According to Viacom, their programming accounts for 20% of shows DirecTV customers watch, giving Viacom a massive amount of leverage in their negotiations. 

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If there is one winner in the Viacom-DirecTV battle, its companies like Netflix, Hulu and other services that stream media content over the internet. In an age where people literally don't need cable to watch their favorite shows, the fight between these giants helps companies like Netflix. The more Viacom and DirecTV fight, the more appealing services like Netflix looks to customers, a video-on-demand service that lets you watch what you want, when you want. And when people watch Viacom programming on Netflix, they are just strengthening Viacom's argument. Also, Viacom will be able to charge more in fees from Netflix, who pay networks a lot of money to display their programming on their website. So the longer this drags on, the better it is for Netflix and similar services, who will be able to poach more and more customers from DirecTV to subscibe to their sites. 

However, don't make DirecTV to be a victim just yet. When it comes down to the mathematics behind the negotiations, Viacom is demanding a few cents per customer, when they include channels like TeenNick or other third-tier and niche programming that Viacom produces. Considering these two companies negotiated their contract over 7 years ago, Viacom asking for a 4% raise per year is not really that unreasonable, especially given the fact that Viacom is so integral to the programming DirecTV offers. DirecTV is banking on the idea that their customers won't leave them, but when 20% of their programming becomes unavailable, customers won't be hesitant to leave, especially in this economy, when budgets are tight for so many Americans and much cheaper alternatives are readily available. 

But, there are always casualties in warfare. In this case, it is the consumers, who just want to watch TV. Its not their fault that Viacom is demanding more money from DirecTV, or that DirecTV refuses to expand its budget a little more for programming that, while declining in popularity, many of DirecTV's 20+ million subscribers still watch. Yet they are the ones paying the price for the battle between to media conglomerates. 

Unlike the AMC and Dish Network dispute, where AMC offered to stream the season premiere of one of the most well known shows, Breaking Bad, the customers in the Viacom-DirecTV controversy are getting the short end of the stick. When DirecTV told their users to go online to view popular shows like "The Daily Show," Viacom responded by pulling certain programs from their websites. It's clear that Viacom only did this to increase their leverage, but it only hurts the customers. Similarly, DirecTV has shown little sympathy for their subscribers but essentially cutting 20% of their programming while they keep their prices the same (but they are offering a measly $15 refund, according to this post). 

It's obvious that DirecTV has to pay Viacom close to the raise they've requested, according to industry analysts. The problem is the longer it takes, the more frustrated DirecTV subscribers get. 

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