DirecTV Blackout Produces Competitor Freeding Frenzy

 

Image Credit: Wikimedia Commons

(Above, a Viacom character whose basic premise I detest)

Or, did it?

In the past, when a content creator (say: Viacom) had a dispute with the distributor (say: DirecTV), while the contracts were being re-negotiated, as soon as the content creator’s channels were blacked out, competitors would be out in force, hunting for disgruntled subscribers.

This time, in the Viacom-DirecTV fight, things appear to be different, as seen from the lack of large scale subscriber desertions.

Though DirecTV customers have been without MTV, Nickelodeon, Comedy Channel, and other Viacom networks for more than a week now–the longest-ever blackout of Viacom-owned networks–the distributor has only seen a small number of its subscribers cancel service, according to its top programming negotiator, Derek Chang.

and realization among other distributors (excluding Dish TV) that today it could be DirecTV but tomorrow it could be them (behind WSJ paywall):


But in an unusual show of support, in recent days Time Warner Cable Inc., Cox Communications Inc. and Mediacom Communications Corp. have each publicly backed DirecTV’s position, presenting a unified front against steadily rising programming costs that are wracking the pay-TV industry.

In the past, some cable and satellite systems have swooped in to grab competitors’ disgruntled customers during such blackouts—but those efforts are less common nowadays, executives say. It seems the pay-TV industry has more to gain from resisting price increases than from exploiting the troubles of a besieged rival distributor.

At its heart, the dispute is about the “Who creates value? Who captures it? And in what proportion?” question and the tension it creates any time value is created by a series of players along a sequential value chain (In this instance, we have: Content Creators in the form of Studios -> Distributors or MSOs -> Subscribers, with advertisers thrown in the mix for good measure somewhere and somehow, in there).

It will be interesting to see who backs down. I think that Viacom will, to a larger extent than DirecTV, especially because multiple distributors are publicly expressing solidarity. But Jeff Bercovici at Forbes thinks that 

DirecTV will end up gritting its teeth and meeting Viacom more than halfway on price, and sooner than later

We shall see.

Update on July 20: Viacom and DirecTV did settle, but the terms were not disclosed. According to another WSJ article,

DirecTV was able to negotiate a lower increase than what Viacom had sought, according to a person familiar with the situation.

 


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