The disagreement between
) and TV network major
) regarding programming fees has led to channel blackouts for
Viacom network, which owns popular channels like MTV,
Nickelodeon and Comedy Central, has decided to increase its
programming fees for DIRECTV users by more than 30%. Such a hefty
increase in programming fees will likely increase DIRECTV's
operating expenses, hence affecting its bottom line by a
At present, DIRECTV is paying nearly $500 million annually to
Viacom for its service. So, another 30% hike will not only increase
its content cost but will also lure other TV network companies to
hike their rates, thus resulting in further increase in cost going
So in order to counter the mounting expenses, DIRECTV will need
to pass on the expenses to its subscribers, which in turn may
increase its churn rate.
So the best possible way to resolve the issue is through proper
negotiation as most DIRECTV subscribers pay for a complete package
of channels from Viacom, including many lesser known channels. So
by removing those channels from its list may reduce cost for the
A few days back,
Dish Network Corp.
AMC Networks Inc
) channels from its program list as the former was demanding higher
rates from Dish Network.
We believe that such instances will always appear between pay-TV
and Network service providers at the time of renewal of service
We maintain our long-term Neutral recommendation on DIRECTV.
Currently, DIRECTV has a Zacks#3 Rank, implying a short-term Hold
rating on the stock.
AMC NETWORKS- A (AMCX): Free Stock Analysis
DISH NETWORK CP (DISH): Free Stock Analysis
DIRECTV (DTV): Free Stock Analysis Report
VIACOM INC-B (VIAB): Free Stock Analysis Report
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