Viacom Inc. and Dish Networks' negotiations over a new carriage deal are going down to the wire, and could result in a blackout of Viacom channels, including Nickelodeon, Comedy Central, MTV, BET and TV Land, in nearly 14 million customer homes nationwide.
The deadline for a deal is Wednesday night. The previous carriage contract expired in late February, and the two sides agreed on an extension.
But the two companies appear to be making little progress in the talks.
Viacom on Tuesday began running a message crawler on its channels, warning of the possible outage on Dish's television systems, including nearly 500,000 homes in the Los Angeles region.
"We are extremely disappointed that Dish has not engaged in a serious way to reach an agreement for Viacom's No. 1 family of cable networks," Viacom said in a statement. "This is par for the course for Dish, which has deliberately derailed 10 renewal negotiations since last year by engaging in unproductive discussions and contentious public battles."
Wall Street has been closely monitoring the situation because of the ramifications for both companies. Viacom has been struggling to lift its sagging stock price amid the underperformance of its Los Angeles movie studio, Paramount Pictures, and key channels, including Comedy Central.
The loss of affiliate fee revenue from Dish for the two dozen channels would sting Viacom at a particularly difficult time. Investors have been worried that Viacom's channels are not as vital to consumers as they were a few years ago.
"We suspect Viacom's statement means that Dish is playing hardball in negotiations, but that was to be expected," Doug Creutz, media analyst with Cowen & Co., said in a research report. "We still believe the most likely outcome is a renewal, as neither player is in a competitively strong position and would run serious risks by walking away from a deal."
Dish has lost a substantial number of customers in the last two years.
The satellite TV company could ill afford to lose more subscribers, but the Colorado-based company, controlled by billionaire Charlie Ergen, also wants to keep a lid on escalating programming costs.
"We regret that Viacom has chosen to involve customers in a business negotiation when time remains to reach an agreement," a Dish spokesman said Tuesday morning. "Viacom is asking hundreds of millions of dollars in increases, despite the changing landscape that includes drastically reduced viewership of Viacom channels and wide availability of their content across multiple platforms, frustrating consumers who don't want to pay twice for the same content. Dish will continue to negotiate in good faith to reach an agreement that works for both sides."
Analysts, including Creutz, have predicted that the two sides eventually would agree to a new carriage contract. Dish has been ramping up its streaming service Sling TV, and some of Viacom's channels, including Spike, Nickelodeon and MTV, appeal to younger consumers and could make a good fit with that service.
"Plenty of other carriage negotiations among multiple content owners and distributors have extended up to and even past the terms of existing agreements, and channels have gone dark for brief periods of time on several occasions," Creutz said.
"However, no major distributor has yet permanently blacked out a major content owner," he said. "So far we don't see anything concrete to indicate this negotiation will end differently."
Viacom shares were hard hit by the news Tuesday, sliding about 8% to under $36 a share.