DirecTV Subscribers May Lose Viacom Channels at Midnight

Latest Retransmission Battle Erupts With Viacom Ratings in Background

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DirecTV subscribers will lose Nickelodeon, MTV , VH1, Comedy Central and 22 other Viacom channels at midnight if the companies can't work out an agreement to replace their current pact, according to the companies.

'Snooki and Jwoww' on MTV
'Snooki and Jwoww' on MTV

As has become increasingly common in retransmission negotiations, both parties are trying to enlist customers to their side. DirecTV said Viacom was seeking a 30% rate hike. "That's over $1 billion on top of what you already pay for not only MTV and Nickelodeon, but also all of their other channels that you might never watch," it said at DirecTVpromise. "You should be able to decide which Viacom channels you want and which you don't."

Viacom said in a blog post that it's the most watched programmer on DirecTV, accounting for 20% of all its viewing, but that it only gets paid for about 5%.

"Despite our best efforts, DirecTV has rejected all of our proposals to renew our agreement," Viacom said late Monday night. "This evening, DirecTV provided Viacom with a counter proposal that included a lower rate than Viacom receives from any other distributor in the industry. With this offer, our negotiations have reached an impasse."

The carriage dispute doesn't come as a surprise to Bernstein Research analyst Todd Juenger, who predicted last month that Viacom's ratings pressure at key networks like MTV and Nickelodeon could lead to distributors to drop its channels.

"It has been inconceivable that any distributor could drop Viacom's networks, mostly because of Nickelodeon," he wrote in the note on June 12. But ratings have declined, often significantly, at networks representing 71% of the fees Viacom collects from cable and satellite companies, he said.

UBS analyst John Janedis downgraded his rating on Viacom's stock Tuesday due to concerns related to ongoing ratings weakness. "We continue to think the concerns related to Netflix/Amazon viewing are overblown in the near-term, but from a content perspective, our sense is that returning series at MTV are under-performing, which will translate to further make-goods and a drag on ad growth in fiscal year 2013," he wrote in a research note. "Weakness in the kids upfront could somewhat temper improvement in ad growth at Nickelodeon."

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