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Viacom, DirecTV Make Progress in Contract Talks, No Blackout After Deadline Passes

UPDATED: Viacom and DirecTV executives went down to the wire Friday on a combative contract renewal negotiation with high stakes for both sides. The companies stayed in talks past the midnight Eastern contract expiration and the channels stayed up on AT&T’s platforms. Sources indicated early Saturday that the threat of a blackout had been averted.

A team of Viacom executives led by Tom Gorke, exec VP and head of distribution and business development, have been parked in DirecTV’s El Segundo headquarters since Wednesday. The companies are wrangling over a carriage renewal pact for Viacom’s 23 cable channels.

On Tuesday afternoon, Viacom launched an aggressive PR campaign to warn viewers that Nickelodeon, MTV, Comedy Central, BET, VH1 and other channels could go dark as of Saturday if the sides can’t come to terms. Viacom enlisted a number of stars across its channels to pitch the companies case in short digital videos spread via YouTube and others.

Viacom needs to get a healthy renewal deal from AT&T’s DirecTV, the nation’s largest MVPD with about 24.5 million subscribers (including U-verse), in order to provide stability for its future earnings. If DirecTV slashes Viacom’s rates and the volume of channels carried, Viacom would take a huge hit and face similar rollbacks from rival MVPDs such as Comcast and Charter. Viacom, in the midst of a turnaround after a long slump, can’t afford to shoulder that kind of setback. DirecTV and streaming bundle DirecTV Now at present carry 17 of Viacom’s channels; its U-verse sibling carries the full freight of 23 (or 24 depending on who’s counting).

DirecTV, meanwhile, has every incentive to push Viacom hard on a rate reset because the satcaster is grappling with a shrinking subscriber base, coupled with AT&T’s need for reliable earnings to shoulder its $170 billion-plus debt load that spiked last year with the $85.4 billion purchase of Time Warner. DirecTV’s performance has been flagging since AT&T bought the satcaster for $49 billion in 2015.

DirecTV has a number of big renewals with top programmers in the months ahead, including CBS, Viacom’s corporate sibling under the Redstone umbrella, and the newly enlarged Disney. There’s no doubt the company wants to send the message in the Viacom talks that it intends to hammer down at programming cost increases amid the gyrations in the pay-TV marketplace.

DirecTV has leverage with its status of serving viewers nationwide and Viacom’s reliance on an estimated $1 billion in annual licensing revenue that it receives from the satcaster. At the same time, a lengthy blackout of staples such as Nickelodeon, MTV, Comedy Central and BET would raise hackles with subscribers and would likely accelerate DirecTV’s steady quarterly subscriber losses. DirecTV and Viacom previously went through a nine-day blackout in a renewal standoff in 2014.

More to come


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