--DirecTV, Viacom reach programming fee agreement
--Pact ends 10-day blackout of Viacom channels on DirecTV
--Financial terms weren't disclosed
(Updates throughout, including analyst quote beginning in
paragraph 10.)
By Drew FitzGerald and Chelsea Stevenson
DirectTV Group Inc. (DTV) and Viacom Inc. (VIA, VIAB) reached an
agreement that ends a combative dispute over programming fees and
restores channels like Nickelodeon, Comedy Central and MTV to the
satellite TV provider after a 10-day blackout.
Financial terms weren't disclosed, but DirecTV said that under
the "long-term agreement," its customers will be able to watch
Viacom programming on their laptops and other handheld devices.
While fee disputes are common in the pay-TV industry, this one
was particularly significant because it pitted one of the nation's
largest cable-network owners against the country's second-largest
pay-television operator, with about 20 million subscribers.
DirecTV had previously said Viacom wanted a 30% increase that
would equate to an extra $1 billion, whereas Viacom had said it was
looking for a fair deal to replace a seven-year-old agreement.
The dispute also was an indication of the increasing friction
between content companies and pay-TV distributors over programming
fees and how programs are distributed online. The impasse got nasty
at times as both sides waged a public relations campaign to gain
customer support.
Even in announcing the agreement Friday, DirecTV took a shot at
Viacom in its press release.
"It's unfortunate that Viacom took the channels away from
customers to try to gain leverage, but in the end, it's clear our
customers recognized that tactic for what it was," said Derek
Chang, executive vice president of content strategy and development
for DirecTV.
The companies couldn't even agree on how many channels were
affected. Viacom said Friday that "all 26 Viacom networks" were
restored, while DirecTV put the number at 17.
One Viacom channel not appearing immediately on DirecTV is the
Epix movie network. Under the agreement, the companies said,
DirecTV has the option to add it. DirecTV had said it was unwilling
to carry the lightly watched movie channel "at the additional cost
of more than a half billion dollars."
Otherwise, though, the news appeared like a win for Viacom, said
BTIG Research analyst Richard Greenfield.
"I can't imagine Viacom would have caved in this quickly," he
said, adding that the entertainment company offers too many
high-profile channels for DirecTV to keep from its subscribers.
DirecTV's shares closed Thursday at $48.95, and Viacom's Class A
shares finished at $49. Both were inactive premarket.
Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com
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