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Viacom Goes to War With AT&T Over DirecTV Carriage Deal

Viacom has declared war against AT&T, blasting the telco giant on several fronts as the companies wrestle over a carriage renewal deal that is vital to Viacom’s long-term financial health.

As of today, Viacom has begun running crawls and promo spots on its channels warning viewers that Nickelodeon, Comedy Central, BET, MTV and other channels could go dark on AT&T’s DirecTV as of midnight ET on Friday, when the current contract expires.

A Viacom spokesman accused AT&T of everything from price gouging to discriminating against “diverse audiences” with the channel selections in its latest packages of skinny bundles for the DirecTV Now and Watch TV streaming platforms.

“Unfortunately, AT&T is abusing its new market position by favoring its own content – which significantly underperforms Viacom’s – to stifle competition,” a Viacom spokesman said. “AT&T-DirecTV’s behavior is also consistent with a recent pattern of gouging their customers by charging them higher prices for an inferior product with fewer channels. Especially troubling, AT&T-DirecTV is marginalizing diverse audiences in its new DTV packages and threatening to do the same with their existing products.”

DirecTV responded with a gloves-off statement about the state of Viacom’s channels, in the view of the satcaster. It also blasted Viacom for putting customers “in the middle of their negotiations.”

“We’re disappointed to see Viacom put our customers in the middle of their negotiations. We are on the side of customer choice and value and want to keep Viacom’s channels in our customers’ lineups. We hope to avoid any interruption to the channels some of our customers care about,” AT&T said. “The facts speak for themselves: several of Viacom’s channels are no longer popular. Viacom’s channels in total have lost about 40% of their audience in the past six years. Viacom is a serial bad actor in these business negotiations and has repeatedly used these tactics with other distributors.”

Carriage battles between programmers and traditional MVPD distributors have ratcheted in recent years as the pay-TV marketplace has grappled with cord cutting and a flood of low-cost competitors.

The Viacom-DirecTV battle has the makings of a clash of media titans because both companies are under pressure to strike an advantageous deal.

Viacom needs to have its two dozen cablers carried by the nation’s largest MVPD, with about 25 million domestic subscribers. Viacom also needs to make sure that the rates DirecTV pays for its channels aren’t severely reduced. If so, Viacom would take a big revenue hit and it would have a domino effect with other large distributors that have favored-nations provisions in carriage deals that would allow them to also cut fees paid to Viacom.

Viacom has faced rate cuts with other distributors including the deal it struck with Charter Communications in 2017. The terms on the table from DirecTV must be significantly lower to prompt such an aggressive campaign from Viacom.

AT&T, on the other hand, is shouldering a heavy debt load and a shrinking domestic subscriber base for DirecTV. Growth at AT&T’s DirecTV Now and Watch TV skinny bundle streaming services has also slowed, as AT&T disclosed in its first quarter earnings. AT&T has let it be known that it will take a hard line with programmers in upcoming carriage deals given the state of DirecTV’s subscriber base.

“We’ve had very good success so far getting to a rationalization of those content costs,” AT&T chairman-CEO Randall Stephenson said in January. “We think this is an equation we can balance…We’ve got to get the content costs in line with what the customer is willing to pay.”

Viacom is encouraging viewers to put pressure on DirecTV to renew the channels via the KeepViacom.com website. In a memo to Viacom employees, CEO Bob Bakish raised the specter of AT&T abusing its market power at the expense of Viacom and consumers now that it is fortified with the Time Warner assets it acquired last June after it prevailed over the Justice Department in a long antitrust fight.

“AT&T continues to insist on unreasonable and extreme terms that are totally inconsistent with the market,” Bakish wrote. “Having recently acquired Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, who are growing increasingly dissatisfied with paying more for less.”

Here is the full memo from Bakish:

Team,

Over the past two years, we’ve made incredible progress in strengthening and evolving our domestic distribution business.

Not only have we secured more carriage for our brands with existing partners and new, we’ve also expanded the definition of partnership to include new elements, like advanced advertising and co-production arrangements. In the process, we’ve renewed and extended more than half of our subscriber base, securing deals with Altice, Charter, Comcast and others, to give audiences greater access to our brands, and more choice in how they consume our content – most recently in the Charter Essentials product, which Charter announced a few weeks ago.

In that same spirit of partnership, Viacom has been working to negotiate an agreement with AT&T to renew distribution of our channels on DirecTV and AT&T video services. We’ve made a series of offers that are both good for consumers and good for AT&T – giving subscribers more access to the Viacom channels they love, while enabling AT&T to lower subscribers’ bills and provide customers with a variety of packages and price points. Importantly, our offers would ensure that AT&T is able to continue serving the diverse audiences that prefer Viacom to any other cable programmer. And, consistent with our other recent distribution deals, we want to work with AT&T on new opportunities that go beyond traditional carriage.

Despite these efforts, AT&T continues to insist on unreasonable and extreme terms that are totally inconsistent with the market. Having recently acquired Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, who are growing increasingly dissatisfied with paying more for less.

Because of AT&T’s unreasonable position, today we began to warn subscribers that they may lose our channels when our contract expires on Friday, March 22. This would be our first disruption since 2014, so we remain hopeful that we can reach an agreement that fairly values the amazing entertainment brought to life by our brands, and by your talent, creativity and hard work.

I realize that many of you, and your families and friends may be AT&T-DirecTV subscribers. Please feel free to share a link to http://www.keepviacom.com, which will be updated with relevant news and information.

Of course, we’ll continue to update you as this situation develops over the next few days.

Best,

Bob

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