Why Viacom will win in its fight with DirecTV: Jon Stewart, SpongeBob and original content

Battle over fees knocks out major channels in 20 million homes

July 11, 2012|By David Zurawik | The Baltimore Sun

Media companies routinely play chicken in negotiations over such issues as retransmission fees and bundling, terms that mean next to nothing to their customers until one of the companies they subscribe to lets things get out of hand.

Usually, that never happens.

But it did at midnight Tuesday with DirecTV and Viacom, which resulted in the satellite TV provider's 20 million customers being without such Viacom-owned channels as Comedy Central, MTV, Nickelodeon, BET and VH1.

In all, 17 channels were lost at midnight with shows that feature such performers as Jon Stewart, Stephen Colbert, SpongeBob SquarePants and Snooki.

Viewers who went to one of the Viacom channels on DirecTV Wednesday morning instead found a statement from DirecTV saying: "Viacom has forced us to remove this channel. Visit DIRECTVPromise.com for more information."

The message urges viewers to "enjoy" other channels while "we work to get this channel back on the air without an unfair increase to your bill."

At DIRECTPROMISE.com. viewers found more information than anyone wants to know about bundling and rising costs of programming. There was also a video featuring a DirecTV executive trying to be uber-sincere telling viewers how his company is fighting to keep Viacom from raising customers' bills by 30 percent.

All viewers need to know about bundling is that it's the practice of forcing distributors like DirecTV to take lesser known channels, like Viacom's Palladia and Centric, to get Comedy Central and MTV. It goes on everywhere in the media industry -- in all industries.

But here's the bottom line on this fight: Subscribers don't have time to care or learn about the intricacies of new media economics especially when the information is being spun by two giants who are at each others' throats. Most of us are overwhelmed by all the information we have to master day to day to pay our bills on time, fill out the right paperwork for our kids' school needs and try to get the insurance companies to re-imburse us for some small part of our medical and prescription costs.

All subscribers will care about is that they can't find Jon Stewart or Stephen Colbert  tonight when they turn on their TVs if DirecTV doesn't settle.

For all the media and economic theory that says the key to media success is owning distribution, forget it. The key is owning original content -- and that's what Viacom has. Viewers have a relationship with Stewart not with DirecTV. And if the satellite provider can't deliver Stewart, they will find someone who can -- like a cable provider.

If Stewart and Colbert and SpongeBob and Snooki aren't on customers' sets, customers will start looking for a way to terminate their DirecTV contracts. And if they can't terminate them, they are going to be very angry customers.

UPDATE: TVbytheNumbers reports that Viacom has blocked streaming of full episodes of "The Daily Show"  and "The Colbert Report." In case anyone didn't know as of midnight, Viacom is playing hardball. Read that here.
 

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