DirecTV (NYSE:DTV) said its customers were left without Nickelodeon, MTV, Comedy Central and 14 other channels on Wednesday after Viacom Inc demanded that its networks be dropped from DirectTV's lineup in a dispute over fees.
DirecTV, the largest U.S. satellite TV provider with nearly 20 million subscribers, said its executives had approached Viacom with a new proposal and a request to continue broadcasting the channels as talks proceeded, but received no response.
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DirecTV's contract with Viacom, which had been in place for the last seven years, expired at midnight Tuesday.
Speaking to reporters at Allen & Co's media and technology conference in Sun Valley, Idaho, on Wednesday morning, Viacom CEO Philippe Dauman said, "In the last 7 years since we did the last DirecTV deal, we have successfully and peacefully concluded affiliate agreements with every major distributor in the U.S. We are prepared to move forward. It's unfortunate consumers for the first time are not able to enjoy our channels."
Dauman added, "I don't want to negotiate in public."
The standoff is the latest between media companies and cable and satellite TV providers over the cost of content. These providers pay a fee to media companies that allows them to carry channels such as MTV. (See Breakingviews column )
On July 1, AMC Networks, the company behind shows such as "Breaking Bad," "The Walking Dead" and "Mad Men," was removed from the Dish Network after the two companies failed to reach a new contract.
The purchase of television programs is the single biggest cost for distributors, who have fought back in recent years against what they consider unreasonable "carriage fee" increases by content producers like Viacom.
Companies such as Viacom tend to bundle their networks together, forcing distributors to carry lower-rated networks, such as Nick Jr., along with more popular channels such as MTV.
This practice has triggered a debate in the industry about unbundling networks, which would allow customers to choose only the channels that they want to watch.
"We have been very willing to get a deal done, but Viacom is pushing DirecTV customers to pay more than a 30 percent increase, which equates to an extra $1 billion, despite the fact that the ratings for many of their main networks have plummeted," DirecTV Executive Vice President Derek Change said in a statement.
The possibility of DirecTV dropping Viacom's networks was raised in a mid-June note by Bernstein Research analyst Todd Juenger.
Citing falling ratings at Nickelodeon and other Viacom networks, Juenger wrote, "We believe it is no longer inconceivable that a distributor would drop Viacom, or at least engage in a public battle with them over price increases."
In a blog post on Viacom's website, spokesman Mark Jafar wrote that despite Viacom's "best efforts," DirecTV rejected proposals to renew their contract.
In a similar dispute two years ago, Cablevision customers lost Walt Disney Co's ABC channel for several hours, before a deal was reached and transmission restored during a live broadcast of the Academy Awards.
This is not the first time a distributor has blacked out Viacom's channels due to a contract dispute. In 2004, Dish dropped some Viacom networks after the two sides failed to reach agreement on a new distribution deal. That blackout was short-lived, lasting less than 48 hours.