After days of tense negotiations, AT&T and Viacom Inc. reached a new distribution agreement, averting a blackout of Comedy Central, MTV, Nickelodeon and other channels on AT&T’s DirecTV service.
The breakthrough came early Monday — 52 hours after the previous carriage contract had expired. But the two sides were making progress, so executives plowed ahead with the talks beyond the Friday night deadline.
AT&T provides TV service to 24.5 million homes in the U.S., including about 1 million customers in the Los Angeles area. AT&T is the nation’s largest pay-TV distributor, so cable programmer Viacom could ill afford to have its channels dropped. AT&T also owns U-Verse, WatchTV and DirecTV Now.
The talks were bruising because AT&T demanded a reduction in the carriage fees charged by Viacom. The Dallas telecommunications company, which is heavily in debt, currently pays Viacom about $1 billion a year for the rights to distribute the channels. AT&T has been hunting for ways to cut costs.
Terms of the new contract were not disclosed, but Viacom appears to have lowered the fees it charges for its channels.
“We are pleased to announce a renewed Viacom-AT&T contract that includes continued carriage of Viacom services across multiple AT&T platforms and products,” the two companies said early Monday in a joint statement. “The deal also brings AT&T customers more choice and improved value for Viacom content.”
Viewers had been worried that they might miss Viacom’s programs, including “The Daily Show With Trevor Noah” and “South Park” on Comedy Central; “SpongeBob SquarePants” and “Paw Patrol” on Nickelodeon; and “Love & Hip Hop: Hollywood” on VH1.
Viacom had enlisted several stars, including Noah, Tyler Perry and Lindsay Lohan, to rally fans to pressure AT&T to keep the channels. Perry weighed in on Facebook: “This is crazy. I’ve had DIRECTV for years. You can’t just drop BET!!! And not expect there to be backlash.”
The dispute comes as both companies struggle to adapt to industry shifts. Streaming services such as Hulu and Netflix have provided consumers with lower-cost alternatives with high-quality shows.
Wall Street had closely watched the negotiations. Viacom earlier in the week suggested that it was prepared to lower its fees to strike a deal. Aside from disagreements over fees, Viacom and AT&T tussled over how widely Viacom channels will be available on streaming platforms that compete with DirecTV.
The stakes were high for both companies. Viacom’s channels aren’t as popular as they once were. The company’s shares slipped 13% this month as investors worried that Viacom would have to make big concessions to remain on AT&T’s television platforms. Meanwhile, DirecTV has been walloped by customer defections, a problem that has weighed on AT&T’s stock price for much of the last year.
DirecTV lost about 650,000 subscribers in the fourth quarter, underscoring the big challenges facing the El Segundo-based pay-TV service. AT&T bought DirecTV in 2015 for about $50 billion. Last year, the company paid $85 billion for the parent company of HBO, CNN, TNT and TBS. Now AT&T is choking in debt to the tune of more than $175 billion.
“DirecTV pays Viacom about $1 billion a year. That’s a lot of cash AT&T could use” for paying down debt, Bernstein & Co. media analyst Todd Juenger wrote Thursday in a research report.
Other analysts said dropping Viacom could be catastrophic for AT&T’s DirecTV, which distributes 17 Viacom channels. In 2012, a dispute between Viacom and DirecTV led to a nine-day blackout.
Viacom’s weakness in such contract negotiations is one reason why its controlling shareholder, Shari Redstone, would like to combine the company with CBS Corp. Pay-TV operators would be skittish to drop the channels if they were packaged with CBS — one of the most popular networks in television.