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Viacom, DirecTV still ‘far apart’ in talks

Companies trying to resolve 26-channel blackout on DirecTV

Viacom and DirecTV are in active discussions, the satcaster’s chairman Michael White said Wednesday, to resolve a heated carriage dispute that has deprived millions of viewers of SpongeBob, Snooki and other denizens of Nickelodeon and MTV.

But the two sides remain “pretty far apart” he told Bloomberg from Sun Valley, Idaho, where he and Viacom chairman Philippe Dauman are frolicking at Allen & Co.’s annual summer camp for moguls.

Viacom has also yanked shows from its own network websites including some episodes of “Jersey Shore” and “Teen Mom” in order to pressure DirecTV, which has been proposing the Internet as an alternative where viewers can watch the 17 channel that went dark overnight.

A Viacom rep called it a “slimming down” of content, not an across the board purge, and said there were over 4,500 long-form episodes still available on the sites.

“DirecTV dropped 26 of your favorite channels,” read a big banner across MTV.com, urging viewers to call and complain. “We need your help,” said Dora the Explorer.

BTIG analyst Richard Greenfield said he thinks DirecTV “is making a critical mistake” by allowing Viacom programming to be dropped, “While we appreciate DirecTV’s goal of maintaining robust free cash flow and an aggressive share repurchase program, we believe losing a wide array of programming valued by their subscribers could seriously harm the company.”

Viacom has pointed out that makes up 20% of DirecTV’s viewership but only 5% of its programming costs and said the satellite company wants to pay it less than anyone else coming off an “ancient” seven-year contract that expired at the end of June.

But Nickelodeon ratings have taking a tumble since last fall and DirecTV’s White has been outspoken about going dark if he believes carriage costs are too high.

Investors knocked DirecTV shares down 1.11% to $48.15 Wednesday although most assumed the standoff would eventually be settled.

Viacom shares eased 0.28% to $46.73.

“We would not be surprised to see this blackout drag on in a similar range of time somewhere between the News Corp./Cablevision (10 days) and the News Corp./DISH (1 month) blackouts in October 2010,” predicted Nomura analyst Michael Nathanson.

He figures Viacom would need at least a 50 cent per subscriber step up, or an increase of about 24%, from its current DTV deal to avoid triggering a ‘most favored nation’ clause with existing contracts. MFN allows other video providers to pay the lowest rates.

“We expect Viacom to ultimately receive a significant step-up in fiscal 2013, and then return to at least high single digits with DTV over the remaining life of the deal,” he said.

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