When DirecTV Drops your Favorite Channels

The latest from Laura Frankel at KIT digital Content Solutions

So the latest dispute between a content owner and a distributor is playing out with the DirecTV/ Viacom squabble. It may resolve itself before you see this; but even if it does, what I find fascinating with all this is how each party reacts to the issue and defends their position as an advocate to the consumer.

DirecTV is blaming Viacom for the loss of the channels saying that they are demanding too much money and are not open to an “a la carte” approach that DirecTV proposed to protect its customers’ interests. DirecTV says that they reached out to Viacom and did not hear back and to avoid being in breach of contract had to pull the channels. Viacom says that they only asked for an increase of “pennies” per sub and that DirecTV pulled the channels before negotiations were complete. They are even disagreeing around the number of channels pulled – DirecTV says 16 and Viacom says 26 – the difference being the HD channels… and one can see both sides to that count as a consumer really does not count TBS HD and TBS SD as two different channels; but from a content owner perspective and a distribution perspective, there are operational costs to supporting both.

Viacom also created a brilliant spot in retaliation – check it out here: .

DirecTV will get the Viacom channels back; but what this shows is that the battle between content owners and the major distributors is getting more and more contentious as the margins for both businesses gets tighter and tighter with the fragmentation of the market.

And, I believe it is only going to get worse before it gets better.

All this tension is a sign that our old business model is breaking… what the new one will be, we do not know yet. The “a la carte” model will kill the cable channel business and we will most likely lose channels like Science; ID; Military; VH1; MTV2; and ESPN Classics that do not attract high enough subscriber numbers on their own to support themselves. The only reason they survive today is that they are leveraged as part of a packaged bundle forcing the distributors to pay a fee for the whole bundle which helps the content owners with their margins and allows them to leverage a portfolio of channels.

If the content owners get lower sub fees; they will have to kill off their smaller channels to survive or revamp those channels with more repeats and lower quality content – no more Morgan Freeman’s Through the Wormhole; or Blood; Lies and Alibis. Because, our dirty little secret is that those smaller channels are riding on the coat tails of the bigger players like Discovery, TLC, MTV, TNT, etc. These smaller channels cannot survive on their own affiliate and ad revenue and hence the dilemma.

I could argue whether Viacom really does contain your favorite channels though that is a subjective question isn’t it? I would be quite upset not to have my Jon Stewart, Teen Wolf or South Park and I am sure there are others who will miss Hot in Cleveland or Snooki and JWoww. So we will see what happens when DirecTV drops your favorite channels in the new few days, weeks, months and years to come as the issue is not just between DirecTV and Viacom but is a larger issue around a broken business model.