After Carriage Wars, Subs Lose. Companies? Not So Much

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After nearly two weeks of
chest-thumping, namecalling
and blame-trading,
two major carriage deals were settled
last week between Viacom and
DirecTV, and Time Warner Cable
and Hearst Television. And despite
all the rhetoric, according to some
analysts, in the short term it looks
like the increasingly nasty battles
managed to serve some purpose.

Viacom and DirecTV buried
their respective hatchets on July
20, with the programmer’s 17
channels returning to DirecTV’s
20 million customers after being
off the air for nine days.

Time Warner Cable settled its
retransmission-consent disagreement with 15 Hearst television stations in 13 markets on
July 19, a 10-day impasse.

While it was inevitable that each deal would eventually get done — being without programming
or distribution serves neither side in the long
run — the increasingly nasty fights are giving a black eye
to both sides of the industry.

To that aim, DirecTV received unprecedented support
in its Viacom dispute from cable operators Cox Communications,
Time Warner Cable, Mediacom Communications
and small operator lobbying group the American Cable Association, entities that normally
use carriage battles to snatch customers away from their rivals.

While the Time Warner Cable fight had its moments of high drama, it was nothing compared
to the Viacom-DirecTV spat. That dispute was marred by the programmer temporarily
blocking online access to some of its programs (in part to undermine DirecTV’s marketing
efforts to customers that they could use the Web to view the missing Viacom shows), an ad
blitz complete with a sobbing SpongeBob SquarePants and accusations that the programmer
was using the scuffle to force its fledgling movie network Epix on DirecTV customers.

In the end, both sides offered backhanded compliments in statements after the settlement,
with Viacom praising customers for their patience during the “challenging period”
and DirecTV stating the blackout was an attempt by Viacom to gain negotiating leverage,
but commending its subscribers for recognizing “that tactic for what it was.”

Pivotal Research Group principal and media & communications analyst Jeff Wlodarczak
said the battle probably benefited DirecTV in that it most likely didn’t result in a major loss of
customers. “I would be surprised if DirecTV did not get a modestly better deal while also informing
their customers that there is a reason their rates go up every year,” Wlodarczak said.

For Viacom, the lost-advertising impact of the short outage was likely small, according to
Pivotal media analyst Brian Wieser. Sanford Bernstein senior media analyst Todd Juenger
speculated Viacom might be getting about a 20% affiliate fee bump in the first year of a new
deal, followed by smaller increases, averaging out to a 7% compound growth rate over seven
years, in line with what analysts had expected.


In consumers’ minds, increasingly
nasty carriage spats are
leaving both sides bloodied.