Viacom gets 20% rise from DirecTV
July 23, 2012
It seems that ‘content is still king’ as far as broadcasters are concerned. While the 10-day stand-off between programme supplier Viacom and broadcast platform DirecTV was settled last Friday, the one element missing from the press statements was money!
Now, if reports on Bloomberg and elsewhere can be believed, Viacom boss Phillipe Dauman can rub his hands with glee at having forced DirecTV to cough up an extra 20 per cent for Viacom’s bundle of channels. Twenty per cent doesn’t sound too much, but that equates – says Bloomberg – to a massive $600 million in fees in a year. And because there’s a built-in yearly price escalator in the new seven-year contract that works out at a very impressive revenue stream of $5 BILLION during the lifetime of the contract.
Which helps explain why Viacom was quite prepared to sit out the dispute despite it losing a reported $14 million a week. Set $14 million against $5 billion and you work out how the maths benefits Dauman and his Viacom team. And the deal sets a benchmark for every other platform, whether satellite or cable, and perhaps overseas, as well as in the North American market.
However, DirecTV can also claim ‘victory’ in the squabble given that at the end of the day it paid less than Viacom was demanding.
So if Viacom ‘won’ and DirecTV didn’t lose, then who suffers? The answer is the poor subscriber who will find that come the end of the year subscriber fees will rise to fund the pay-off.
Only time will tell whether increased subs for channels that are not watched as part of a broadcaster’s ‘basic’ bundle will drive subscribers to more ‘cord-cutting’. The risks for all are high but it seems that this particular seven-year deal suggests that both parties to the contract expect today’s status quo to continue for some time to come.