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Viacom Tumbles After Warning of Possible Blackout on DirecTV

Lucas Shaw
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Viacom Tumbles After Warning of Possible Blackout on DirecTV

(Bloomberg) -- Viacom Inc., the owner of cable networks including Nickelodeon and MTV, fell as much as 4.7 percent after warning that pay-TV customers of AT&T Inc. could lose access to its movies and TV shows unless the companies reach a new programming agreement.

The shares were down 4.5 percent to $26.27 in New York after falling as low as $26.23. AT&T, the owner of DirecTV, was down as much as 0.9 percent. It’s the largest U.S. pay-TV provider with 24.5 million customers.

The current contract between the parties expires Friday, Viacom said Tuesday in an email. The media company began activating a “crawl” message on its networks, alerting customers of the looming dispute.

Price disputes between media companies and pay-TV system owners reflect pressure on both sides to squeeze more money from a shrinking pool of cable and satellite customers. Programmers like Viacom count on ad revenue and subscriber fees to pay for the TV shows and movies they air. Pay-TV system owners like AT&T are losing customers to lower-priced options like Netflix Inc.

What Bloomberg Intelligence Says

“After Viacom finally made some progress turning around its cable networks, a looming showdown with DirecTV threatens to destabilize its recovery efforts, risking as much as $1.5 billion in annual affiliate and advertising revenue.”

-- Geetha Ranganathan and Amine Bensaid, Americas media analysts

Click here to view the research

Viacom, which also owns Comedy Central and BET, says it has made a series of offers to AT&T that allow the company to lower customers’ bills. The New York-based media company accused AT&T of using its new market position, as owner of Time Warner, to favor its own content.

‘Unreasonable Terms’

“AT&T continues to insist on unreasonable and extreme terms that are totally inconsistent with the market,” Viacom Chief Executive Officer Bob Bakish said in a memo to employees. “Having recently acquired Time Warner, AT&T appears intent on using its new market power to prioritize its own content at the expense of consumers, who are growing increasingly dissatisfied with paying more for less.”

AT&T, in its response, called Viacom “a serial bad actor” in negotiations with pay-TV companies.

“The facts speak for themselves: several of Viacom’s channels are no longer popular,’ AT&T said in an email. “Viacom’s channels in total have lost about 40 percent of their audience in the past six years.”

Price Increases

In April, AT&T will raise prices on its streaming pay-TV service. The company boosted prices for its satellite TV service in January.

The phone giant completed the purchase of Time Warner last year and in the past month won a final victory over the U.S. Justice Department’s efforts to stop the deal on antitrust grounds. Since then AT&T has begun reorganizing the business, which includes Warner Bros. studios, HBO and Turner Broadcasting. The division, which operates networks that compete with Viacom, has been rechristened WarnerMedia.

Viacom was among several media stocks that slumped on March 13 following reports that AT&T would be removing channels from a reshaped DirecTV Now streaming service.

--With assistance from Scott Moritz.

To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III, Rob Golum

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