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David Poland

By David Poland

Is Viacom/DirecTV Where The Rubber Meets The Road?

We are still early in the era of pay everything to watch everywhere. As a consumer, you aren’t feeling it yet, but the trend is away from you paying all the freight by watching commercials – hence the maxim that television’s main job is selling eyeballs to advertisers, not programs to consumers – and to the producer/owners being paid a little less at every step, but being paid at EVERY step in some way.

Extrapolating from figures reported by the LA Times, DirecTV is now paying Viacom over $2 billion a year for the right to “rebroadcast” its networks. This deal is probably 3 years old. Viacom now wants another chunk. DirecTV says it’s a 30% bump equalling $1 billion. Viacom says that it’s pennies a day for each of DirecTV’s 20 million subscribers. Let’s be conservative and put the bump request at 25% and $750 million. That’s $37.50 per DirecTV subscriber per year or 10.3 pennies a day. This is on top of another, say, $112.50 a year that Viacom is already getting. So now we’re up to $150 a year per DirecTV subscriber or $12.50 a month or 42 pennies a day.

Viacom is a very valuable series of cable networks. My child lives on Nick JR shows. My wife watches those teen pregnancy shows. I watch The Daily Show 4 days a week (that’s all it’s on new).

On the other hand, I can get The Daily Show on Hulu Plus the next day. My so can watch the entire history of those Nick shows on Netflix and Amazon Prime, where I a, already dropping $15 a month between them. And my wife shouldn’t be watching that garbage anyway. (ha ha)

Viacom has been having a rough time with its ad sales for those cable nets. That is the nature of these changes. It’s horrifyingly like newspapers and the web, where the impact of print ads has diminished, but the more impactful web ads are still way underpriced by the ad buying community. The bar was set low and is not rising fast enough to make up for the print losses, in that example, or the on-air ad sales losses in this example. And that’s for the big guys. Imagine the pain of owning a local channel in this ad economy.

But how much is enough? How much is too much?

At some point, providers like DirecTV and Kabletown are going to have to really get ahead of each individual contract and set the ground for a clear future. Right now, it’s constant turmoil. There are only a half dozen or so major content dealers, so it’s not chaos, but the consumer is feeling the pain more and more, which eventually starts to eat away at an industry. (see: studio distributors and exhibition). AMC is off of Dish for now. Viacom off of DirecTV. Battles that go against the clock of major sporting events have become a regular feature of urban life. None of this – especially the consumer being aware of it – is good for business.

But DirecTV and the others face the same problem Netflix is in – and many are still in deep denial about – which is being forced by the economics to change business models.

I am paying someone, in this case, other than DirecTV, to bring Comedy Central into my home. And that provider is playing fewer commercials than DirecTV. Viacom is making its aging children’s programming available without commercials via other outlets that I am willing to pay for as well. And of course, Viacom’s getting paid by those outlets too. At some point, it just becomes math.

Viacom needs DirecTV every bit as much as DirecTV needs Viacom in this scenario. Viacom has already learned that outlets like and including DirecTV feel okay about refusing to add EPIX – Viacom/Paramount’s pay movie outlet, in spite of it meaning the loss of one of six studio’s recent movie outputs. But that’s not like taking away something viewers already have as “basic cable” and are sued to having readily available.

On the other hand, DirecTV is already kicking in approximately $2 billion a year to run those channels. That money and those eyeballs can’t be replaced anytime soon… even if as much as 25%of DirecTV subscribers moved to have access to the Viacom channels cabled/satellites in.

But if DirecTV pays Viacom more – not just paying, paying a lot more – than other equal cable groups and the more important ones will surely be back for more soon.

DirecTV’s total annual revenue is under $30 billion. If Viacom is already getting 6% -8%, can DirecTV afford to give them, say, 10% without Viacom’s cable nets offering any hope of growth?

Maybe they can. I don’t know the detailed math. But at some point, the answer will be, “no.”

And then what?

39 Responses to “Is Viacom/DirecTV Where The Rubber Meets The Road?”

  1. LexG says:

    Just use your VCR.

    Good enough.

  2. martin s says:

    DirecTV’s total annual revenue is under $30 billion. If Viacom is already getting 6% -8%, can DirecTV afford to give them, say, 10% without Viacom’s cable nets offering any hope of growth?

    That’s the real point. The Newscorp/DirectTV blowout was just last November.

    I’m don’t know if monopoly laws can effect satellite since its apart of the larger television delivery world, but this all seems to be leading to the eventual merger of Dish and Direct. The roadblock would be the stock ownership mess of Directv. SiriusXM is eventually going to be part of that fold, also.

    If Newscorp didn’t give up its stake in Directv a few years ago, they’d be in position to take over right now.

  3. Joe Leydon says:

    There’s also this complication: I think it’s safe to say we now have an entire generation of viewers with a sense of entitlement. That is, people who don’t want to pay to see anything — but who don’t want to watch commercials either. Does the future depend on changing their minds? And if so: What if they don’t want to change??

  4. Paul D/Stella says:

    Are the people who don’t want to pay to see anything the same people who don’t want to pay to listen to anything? The exchanges between musician David Lowery and the NPR intern were quite interesting. I don’t think they want to change.

  5. KrazyEyes says:

    These types of stories used to piss me off but since I cut the cord on cable TV service 6-7 months ago I don’t really care anymore. With a little patience, I’m making due just fine with DVDs, Netflix, Hulu+, and a digital antenna.

  6. It took this outage to make me realize that literally the only thing I watch on any Viacom channel is, like David, “The Daily Show.” As far as I’m concerned, let it be a long negotiation…

  7. hcat says:

    My four year old is one of those entitled ones (though to be fair it is more through training). Ninety percent of what she watches comes from Netflix commercial free. When we were on vacation this weekend and needed 30 minutes to make dinner and put the baby down we found the Disney Channel on the cabin cable and within five minutes she was yelling for us complaining about all the commercials. Then we couldn’t pause the program when she had to pee….

    In general I love it because I have better control over what she watches and don’t have to hear “Can I have THAT?” during the commercials, but I do worry about that having it all at her fingertips will warp her sense of entitlement the same way that the microwave warped my generation’s sense of patience.

  8. hcat says:

    From a business standpoint DirectTV is in the right, %30 to Viacom would mean the same for all other conglomerates that have cable channels that people actually watch (If you look at the prime time all demos rating’ Viacoms highest performing channel is BET in 20th place coming in behind channels from all the other providers including the much smaller Discovery and Scripps). If Viacom gets 30 why shouldn’t A&E get 30 when they consistantly have cable’s highest rated shows?

    From a content standpoint Fuck ’em. Without the Daily Show/Colbert Viacom’s channels provide a constent stream of shit even for the low bar of cable programing. Nick is just a training ground for ugly shrill programing to transition the kids to the ugly shrill programing on MTV Spike and VH1 and then a constant diet of tacky sitcoms and cadavertastic police procedurals on CBS.

  9. JS Partisan says:

    Nick is just a training ground, for ugly shrill programming? What in the name of Nipsy Russell’s ghost are you on about? Yes, all of their wonderful animated series like Korra, Spongebob, Kung Fu Panda, and those damn Penquins are about transitioning. Sure they are, but you want to refer to the tween side. Which is fine, but let’s not throw the network under the bus, that provided the world with the true Avatar.

    Also, seriously, it’s cool to cut cable, if you don’t watch sports. If you watch sports, then you need cable. Sure, you can find the feeds all over the net, but they are rarely broadcast quality. This leaves those of us who watch sports, needing cable, and once you get rid of us needing cable. That’s when everything changes.

  10. etguild2 says:

    Many shows, aside from utilizing sites such as Hulu, also rebroadcast shows on individual channel or show sites.

    For example, Comedy Central has every episode of The Daily Show and The Colbert Report on the show’s sites the next day. So if you have an Apple TV, or one of those little Roku Boxes, you can access many shows on your TV, even if they aren’t available on Hulu.

    I canceled my cable service, aside from 20 channels, for this very reason. If there’s a game on, I can either go to a bar, or often, ESPN3, their online service, will broadcast it live as they did all of Wimbledon.

  11. hcat says:

    Spongebob is not ugly and shrill? They talk in nearly all screams and the color scheme looks like its based on someone puking into an aquirium.

    And not sure what Korra is but in particular Wow Wow Woobsy, Dora/Diego, Nei Hai Kai-lan, and the schizophrenic dinosaur kid are all bland and cheaply produced mind-numbingly dull entertainment aimed at children that reflects the rest of Viacom’s overall slate of bland cheaply produced etc. etc. that they make for adults.

    Not to sound too crunchy, but PBS is the gold standard for kids programming and part of the reason I despise the other stuff is that it intices the kid to watch crap over quality.

  12. hcat says:

    Though forgetting about quality for a moment, Spongebob is indicitive of Viacom’s current problem with Nick. Every article I read leading up to the drop always had a picture of Spongebob as the representation of Nick and hasn’t he been around for over a decade? While I dislike Disney for many reasons they are at least able break new shows. I don’t really pay all that close attention to the kid tv business other than what my own kid watches, but it seems like every two of three years Disney is able to break some new phenom like High School Musical, Jonas, Hanna, Wizards, Phineas, Neverland Pirates while Nick treads water with the same old stuff. Even at Viacom’s other channels, they seem to have shows that last either two years or two decades with no middle ground.

  13. etguild2 says:

    Nick, last summer, did an experiment running its 90’s shows…Clarissa Explains it All, Keenan and Kel, Doug, Hey Arnold, The Rugrats etc at 3am.

    I can’t tell you the number of young parents who TIVO’d it for their kids. Nick is in a sad state today.

  14. LexG says:

    Who has hotter chicks, Disney or Nick?


  15. hcat says:

    Another problem (and I am aware that I am taking up a lot of space on this thread) that Dish brought up in the dispute with AMC is the piggybacking that goes on. Dish is willing to pay a decent rate (probably above ratings avagerage) price for AMC but having to spend additional revenue on IFC and WE, which ratings wise are floating upside down in the goldfish bowl, is out of the question. Viacom yanked 26 channels from DirectTV, there is no way that even half of those averaged over 300,000 people a night, but Viacom keeps them going because up to now they have been able to force the cable companies to pay them carriage fees on them.

    The providers need to be able to purge these hardly watched stations (goodbye OWN), or at least be able to shift them to a higher priced package and keep the bills down.

  16. LexG says:

    WTF are you guys even REMOTELY talking about? Starting with Poland’s whole piece… Sorry, this is SERIOUS First World Problem White Guy bullshit… Dish, streaming, Hulu, DirecTV… I don’t know ANYONE who has any of that shit, ANYWHERE.

    Don’t you just get like Time Warner or Charter or Adelphia or whatever it is in your neighborhood and that’s that? Who does all this DISH shit, it’s for millionaires. Christ, I don’t even have a DVR or TIVO, I go straight VHS when I need to record the whopping two shows I follow with any intensity.

    Who CARES? It’s just fucking TV. And if it’s movies, see it in the theater or Redbox it. Fuck ALL this super-connected on-demand horeshit.

    If this were 1982 none of you guys would have watched any of your formative HBO faves on a whim then 20 times on repeat. You’d be too busy programming exactly what you want to see, with no curiosity about anything else.

    Half the fun of cable was that you’d catch something and unaware and end up riveted to it. Now with everyone DEMANDing their exact entertainment options, nobody accidentally stumbles onto anything anymore, or sits through anything outside their wheelhouse. It’s too rigid.

  17. etguild2 says:

    Cable isn’t fun anymore when it’s 60 bucks a month and I don’t watch 95% of it. That’s why I don’t have it.

    I only watch 3 or 4 shows, and I stream on the TV through Roku. Considering I pay 10 bucks a month…probably less than most people in Russia you think it’s a first world white guy problem? Pshah.

  18. LexG says:

    My cable is 170 bucks a month.

    And I only really watch COMICS UNLEASHED and THE FIVE.

  19. etguild2 says:

    Wtf? Im not counting internet and telephone. I hope you are.

  20. hcat says:

    Jesus Lex, I know people with HD in four rooms that don’t pay that. All that and no Tivo?

    And what the hell is The Five?

  21. SamLowry says:

    Took no time at all to get soured on Hulu when I tried to watch Community–a broadcast show, fer cryin’ out loud–and was told I had to sign up for Hulu Plus if’n I actually wanted to watch it.

    And way back in the day when MTV still had vjays, one anonymously told Rolling Stone that despite the massive popularity of the channel and all of its personalities they were still getting paid crap because every penny of profit went directly into Viacom’s vault. I believe one of her quotes was “Working for MTV is like having a gorgeous but abusive boyfriend that all the other girls want.”

    Gee, sounds like Twilight.

  22. john says:

    Lex- you are getting raped at that price. If you switched to AT&T U-verse, you’d save a ton. For $8 more a month than I was paying for Time Warner internet alone (which was buggy as hell) I now get cable & internet and don’t have constant outages. They also gave me $150 in Visa gift cards just to sign up.

  23. Krillian says:

    I have DirecTV and I’m like Danny. The Daily Show is the only Viacom show I watch, and even then it tends to be on DVR the next day, so now I’ll have to watch it on their website instead. My kids can watch Nick shows on Netflix so this isn’t affecting me.

    If I could find a way to watch NFL and NBA games at a decent price, I’d probably get rid of cable altogether.

    I’d love them to purge some of these channels I will never ever watch. I DVR’d The Locator on We a couple times for my wife, and that’s the only time I’ve ever watched that channel. If there was a package that gave me the networks and my choice of 20 channels (NFL, NBA, TNT, FX, AMC, USA, Disney, ESPN, HBO, Showtime, Starz, Comedy Central, History, Fox News, CNN, MSNBC, NatGeo, TCM… and two to be named later) that would be my ultimate and all I’d ever need. I don’t need Speed, Fuse, G4, Logo, E!, QVC, Golf, Current, Galavision, MTV, VH1, OWN, Bravo, MLB, Travel, CMT, and the 200 other channels that are part of my package that I never watch.

  24. Tom says:

    What is wrong with you people who hate Nickelodeon? They have some of the best family friendly shows on television like iCarly and Victorious. These are shows that an entire family can watch together without feeling uncomfortable and are way better than similar fare that you grew up on, like Family Matters or Full House.

  25. LexG says:

    Trust me, as I said upthread, I looooove iCarly, Victorious, and Waverly.

  26. sanj says:

    there are tv channels that seem outdated right now – weather network and tv guide channel .
    all that info can be accessed through the web .

    i get a feeling that 10 years from now – they’ll still b e on tv.

    #1 thing i hate on tv – infomercials at late night – saves every single channel from getting any type of programming on.

    LexG – did you see suite life on deck ? i’m not sure what network its on but i caught it once and said this is very bad…and then Ashley Tisdale shows up and her face isn’t perfect …well her nose ..and now shes 27 and looks pretty nice. she had her nosed fixed.

    2000 comments about viacom / direct tv – lots of great comments on here

  27. jesse says:

    170 doesn’t seem like such a crazy price to me. That’s about what digital cable + DVR + internet + phone + HBO cost at my place… and my wife has called the cable company several times to negotiate rates back down to the same level when they’re about to raise them (so we’ve managed to keep that price for the last few years despite adding HBO, but still, I know it’s not an out-of-this-world bargain).

    I feel like the cord-cutting thing just isn’t really there yet in terms of wanting everything when I want it. I definitely don’t need all of those cable channels. I’m pretty sure 20 or 30 of them could cover pretty much everything I’d ever want to watch (and that would include stuff I only watch occasionally). But as occasionally dodgy as TW Cable can be, Netflix Streaming has knocked me out mid-show or mid-movie plenty of times, and picture quality seems to vary.

    Also, don’t underestimate the (potential) value of a good DVR system. I could create an amalgam of many of the shows I watch using Hulu Plus and Netflix and digital signal and individual purchases, but it seems a little wearying to say, OK, now, which show is on which box starting after which time?

  28. LexG says:

    This is boring; Seriously can we have a thread entitled “White Women and Jailbait” just ONCE so I can do my thing?

    Poland, what is the other side of the hill like? I want to see a SEA OF BLAKE LIVELYS. Blonde hair ONLY.

  29. etguild2 says:

    @jesse, yeah there is a lot of stuff that still isn’t available. I’ve actually found that if I want to see a movie that isn’t on netflix, streaming iTunes is great quality…much better in fact. The problem is the price, of course.

    Glad Redbox streaming is coming soon.

  30. sanj says:


    Viacom blocks free full episodes of Colbert Report & Daily Show for all of Internet to prevent DirecTV customers from watching their content

  31. etguild2 says:

    Wow this is going to produce a major backlash. What the hell are they thinking? Do they think consumers will suddenly rally to their cause, knowing that Viacom wants them to pay more to watch their shows? What’s scary is this is likely only the beginning, with Disney just down the road thanks to increasingly out of control costs for carrying ESPN.

    Good thing the shows are on break till next week…if it keeps up though, illicit sites will see a surge in traffic.

  32. Krillian says:

    Viacom’s wrong.

  33. KrazyEyes says:

    Good for Cox.

    Wouldn’t it be awesome if ALL the cable providers stepped up to the plate and shut Viacom off in solidarity. Won’t happen but it would be nice to see them stand up for their customers.

  34. Don R. Lewis says:

    $170 for cable!? Jesus Lex…..I’ve learned to let you live your life but WTF man?? Did your mother breast feed you until you were 12 and wipe your ass till you moved out?! We pay $99 for cable (all pay channels except Cinemax for some weird reason)/phone and internet. Are you incapable of bettering your life position by yourself in ANY way??

    I know it’s been said ad nauseum in every way but dude, as far as life goes, you’re doing it wrong.

  35. Triple Option says:

    I have Time Warner cable & broadband. Outages I have to say have been rare. But I’m getting bent over. No tittie channels, one HD box, one regular, I think the 2nd remote also costs me. Only the first package above the basic, which is required for HD. I’m over $100/month. I don’t get ESPN Classic or IFC, which I was thinking at one time I did. Both I would watch. There are some other sports channels I’d watch like NHL Channel, CBS College Sports and some regional coverage networks but I refuse. If there’s some game I’m dying to see I’ll go to a sports bar.

    I’ve done the NHL and MLB package before. But now, only like one or two games a night come in HD. WTF?! I’ve had more than enough of AT&T’s bs over the years. Don’t want to do U-Verse. Any more coin I elect to spend on them would be to hire a hitman to take mofos out systematically.

    Directtv has cheaper rates but then I’m locked in for two years. No big deal now but I don’t know if I’ll be living where I’m at 6 mos from now. Plus, they said I’d keep TW for my broadband. Only I know TW will increase the price if I drop them as a cable subscriber.

    Oh, right now the NFL Network isn’t available on TW. At least I think TW has all their other major contracts settled for the next 3-4 years. That’s all I need is to switch and no longer be able to get some basic cable channels that I do on occasion watch. I really don’t watch that much TV. I get more pissed when something comes on that’s rather obscure like on Biography or Military and I can’t get it. Like, srsly! I know there was a suit against the networks and providers against not being able to select your own packages. I know the providers have to bundle things but I hate how they’ll leave out obvious similar channels when you want to upgrade so you end up spending way more. Instead of getting me for one more upgraded package, they got nothing more out of me cuz I refused to buy two upgrades to get the channels I really wanted.

    When is the NFL pass available for PS3? I may try that. I’d like the Directtv and then get it but then how much more will that be over what I’m paying now all told?

  36. Jason B says:

    As we’ve discussed in multiple threads: there is a limit consumers are willing to pay for content. Cable + Internet + Netflix + HBO2go + a sports package is getting pricey. And since all the content providers are moving to charging for their specific content (on top of paying access via cable/Internet) we’re going to break. I say they pick one, content access or just content. Seriously, the first content providers that get together to offer a buffet (say NBC Universal and Disney- and adding a third would be ideal) for like $20/month will have a leg up on the cable/content access companies. Heck, work with an Internet provider to make it better.

    Seriously, Disney + HBO + 4 sports teams (any of the four major sports) + Internet/wi-fi would be great. I’d pay $100/month and it would be less than cable. Infrastructure might be the issue, but we are almost at all wi-fi everywhere.

  37. hcat says:

    ‘Heck, work with an Internet provider to make it better’

    But in most cases your Internet Provider is your cable company. So its unlikely they will help enable cordcutting.

  38. Pam says:

    It’s ridiculous there are so many commercials on pay TV to begin with. It wasn’t all THAT long ago that there weren’t any commercials on cable. The rates keep going up but the channels are making even more money with commercials, streaming, and DVDs, so I don’t have a lot a sympathy for Viacom.

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