By Suzanne Vranica, Shalini Ramachandran and Christopher S. Stewart
With more people using their smartphones to check for rain, the
Weather Channel's place in the television universe is suddenly
uncertain.
In a dispute that captures how changing media habits are
disrupting the established TV world, DirecTV is seeking to reduce
the fees it pays to carry the Weather Channel by more than 20%,
according to a person familiar with the situation.
DirecTV's request has sparked a bitter confrontation that could
see the channel blacked out on the satellite-TV service as early as
midnight Monday night, in what would be its first blackout since it
was launched more than 30 years ago.
DirecTV won't comment on its rate requests, but the satellite
firm has made clear its view that a growing reliance on digital
services has reduced the need for the TV channel.
"People are increasingly getting their weather info on demand on
their devices, whether it's weather.com or apps," says Dan York,
chief content officer of DirecTV. The proliferation of weather news
on Web and mobile platforms is "decreasing value and usage on the
linear TV service."
David Kenny, chief executive of the channel's parent, Weather
Co., disagrees. "At the time of severe weather, TV is still where
people go," he says. DirecTV's request for a "huge" fee reduction
"didn't make sense, and we couldn't be the same service" if it was
implemented, he added.
Weather Channel's average daily audience has fallen 19% to
214,000 since 2011, Nielsen data shows, although the average
climbed to 326,000 between Jan. 3 and Jan. 11, when the weather in
much of the U.S. turned unusually cold.
To be sure, some of Weather Channel's loyal fans have followed
it online. Its websites and mobile apps have consistently been
among the most popular. The sites drew 89 million unique visitors
in November, according to comScore, up 8% from the previous month.
Weather Co. sites--including Weather Underground--rank as the 13th
largest Web property on smartphones, reaching about 33% of the
mobile media audience, comScore estimates.
Sean Collier, a 36-year-old financial-software technician in
Austin, Texas, says he used to rely on the Weather Channel on TV.
But ever since he got his iPhone two years ago, the channel hasn't
been much use to him.
"My Weather Channel watching is now zero," he says. "I use the
Web and mostly mobile apps now for my weather needs," including the
Weather Channel's mobile app.
Still, a viewer online or on a mobile app is worth less to the
company than a TV viewer. Weather Co. sells ad time at higher rates
on its TV channel than on mobile apps or the Web, media buyers say.
And the fees paid by pay-TV operators ensure the TV channel is more
profitable than the digital businesses, according to a person
familiar with the company, even though the two sides account for
roughly the same proportion of ad revenue.
Atlanta-based Weather Co., which is owned by a consortium that
includes NBCUniversal Inc. and private-equity firms Blackstone
Group L.P. and Bain Capital LLC, is asking DirecTV for an increase
of one cent a subscriber each month, according to the company. That
compares with its current fee of 13 cents a subscriber a month,
estimates SNL Kagan.
Mr. Kenny said Weather Channel wasn't making an "egregious"
demand. "We are not trying to be...pigs," he said.
DirecTV is the second biggest pay-TV provider, serving more than
20 million people, so a blackout would have an immediate impact on
the channel's potential audience. But accepting a reduction in its
fees could hit the channel and its parent company, Weather Co.,
hard, and potentially lead other pay-TV providers to make similar
demands. The channel is in more than 100 million households,
according to the company.
The TV channel has revamped its programming to try to retain
viewers. It has brought in high-profile talent, including Sam
Champion, the long-time "Good Morning America" anchor, and reworked
its TV programming to rely less on weather forecasts, adding other
content including reality-TV programs.
But DirecTV is critical of that shift. Mr. York noted that 40%
of the Weather Channel's content is now reality programming like
"Highway Thru Hell," while "our customers have been asking for 24/7
weather coverage."
The dispute echoes rising tensions between pay-TV operators and
TV-channel owners over fees and, more recently, digital
availability of programming. DirecTV, like other pay-TV
distributors, has been a vocal critic of rising programming costs
demanded by TV-channel owners. DirecTV Chief Financial Officer Pat
Doyle said in December at an investor day that "we are going to
continue to look at marginal channels, and we are going to be
prepared to drop those."
In what may have been a harbinger of this dispute, DirecTV in
recent weeks added a small independent weather channel called
WeatherNation right next to Weather Channel.
Adding to pressure on Weather Channel, the outlet isn't
negotiating as part of a group of channels. While NBCU is a
minority shareholder, it isn't involved in the negotiations.
Write to Suzanne Vranica at suzanne.vranica@wsj.com, Shalini
Ramachandran at shalini.ramachandran@wsj.com and Christopher S.
Stewart at christopher.stewart@wsj.com
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