Satcaster could face off next with CBS Corp.
Sumner Redstone may be relieved that Viacom has ended its nine-day standoff with DirecTV, but that may not be the last headache he gets from the satcaster this year.The mogul’s other conglom, CBS Corp., has an affiliate deal of its own with DirecTV that’s set to expire at the end of the year. The companies are already in talks, which were separate from the Viacom negotiations, according to sources. The company’s assets range from broadcaster CBS to premium cabler Showtime. Alexis Quadrani, analyst with JPMorgan, said in a research note that the DirecTV-Viacom resolution could bode well for CBS. “While we had always assumed CBS has good leverage going into these talks, Viacom’s success may set a nice precedent.” The outlook on the Eye capped a broad range of responses from Wall Street on Friday to the new agreement with Viacom, a seven-year pact believed to cost DirecTV $5 billion. That represents a 20% increase over their previous seven-year deal, though not the 30% bump Viacom was seeking. Still, a double-digit increaseshould be enough to please Redstone, according to analyst Doug Creutz of Cowen & Co. “We believe that the deal is likely to have given Viacom most of what they wanted, most importantly, a substantial increase in affiliate fees on the company’s suite of basic cable networks that should allow the company to continue to deliver the high-single digit to low-double-digit growth in earnings that management has guided to the Street,” he write. The deal also gives DirecTV the option to add to its programming lineup the movie network Epix, which Viacom jointly operates with MGM and Lionsgate. The satcaster positioned Epix as a dealbreaker during negotiations, claiming Viacom was insisting on carriage at an additional cost of $500 million. The conglom insisted that some of its deal proposals didn’t even include Epix, which DirecTV has made no decision to carry so far. Marci Ryvicker, analyst with Wells Fargo Securities, sees Epix as a win for DirecTV. “While Viacom has publicly stated that Epix was not a sticking point in negotiations, we believe Epix was likely a significant issue for DirecTV,” she wrote. Another significant component of the deal is a full set of digital rights to Viacom content that DirecTV lacked going into the negotiations. Now the satcaster can offer Viacom fare both in and out of the home across devices. That became a sensitive subject during talks after Viacom yanked programs like “The Daily Show With Jon Stewart” from the Internet but eventually restored them when Stewart voiced his disapproval with the move on the air. The back-and-forth on “Daily” was just one flashpoint in the bitter feuding between the companies since July 10 across the airwaves and social media. Bernstein Research believes DirecTV came out the better of the two companies in the eyes of consumers, an unusual occurrence given TV networks are often regarded as having the upper hand. “The Viacom/DirecTV dispute may be remembered as a critical turning point in programmer/distributor negotiations,” wrote Bernstein. “For the first time in memory, it was the distributor that won the public relations war.” Before the deal was announced, Lazard Capital Markets and Clear Voice Research released a survey that found 28% of respondents said they would cancel or switch providers if Viacom’s networks were dropped from their pay TV service.
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