Chang: Viacom Deal Sends a Signal

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Citing the clear plan and set of objectives that it had going into its carriage negotiations with Viacom, DirecTV executive vice president of content strategy and development Derek Chang said the recently inked deal with Viacom will be a template for future carriage deals for the satellite giant.

"I think the signal we're sending is we are going to stand up for customers to get to a fair deal," Chang said in an interview Friday. "That's the way it's got to be. There isn't a birthright to a 50% rate increase."

Some analysts had expected a battle when DirecTV's carriage agreement with Viacom expired because they initially saw the programmer as vulnerable. With a string of ratings declines at some of its top networks and the lack of a broadcast retransmission consent component, many believed that Viacom was susceptible to an extended blackout. While Chang said that DirecTV did not single out Viacom for a fight, he added that the satellite giant had a clear agenda going into negotiations.

"We had a clear plan, a clear set of objectives going into this process," Chang said. "We wanted to get to fair rates for our customers; we wanted a long-term deal with cost certainty at moderate rate inflators; we didn't want Epix at some huge fixed cost and we wanted to acquire a set of digital rights that would allow us to pursue our digital strategy. We achieved all of these objectives."

Epix was a sticking point late in the negotiations. According to DirecTV, Viacom was insisting on Epix carriage (at an additional $500 million over the life of the deal) as late as Wednesday (July 18). Viacom denied that characterization but in announcing the agreement on July 20 said that DirecTV has the option of Epix carriage in the future.

Chang said DirecTV was unlikely to take on Epix in the near term, but that it could revisit carriage of the movie channel in the future.

According to Sanford Bernstein senior media analyst Todd Juenger, DirecTV likely agreed to a seven-year deal, including a 20% rate increase in the first year and 5% increases thereafter. That would be about in-line with what most analysts were expecting.

Chang wouldn't get into specifics, but said that DirecTV was already paying below market rates so its first year increase is higher than normal, with subsequent moderate annual increases (lower than they have offered anyone else, Chang claimed). DirecTV also received both in-home and out-of-home digital rights for all of Viacom's 17 networks, according to Chang, which should be a big boost to its TV Everywhere initiative.

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