Viacom and Charter in Preliminary Carriage Deal
October 18 2017 - 07:31PM
Dow Jones News
By Keach Hagey
Media giant Viacom Inc. and cable operator Charter
Communications Inc. have agreed to a preliminary deal that would
put eight of Viacom's most important channels in the cheapest
package available to the 16.6 million subscribers to Charter's
Spectrum service, according to people familiar with the matter.
Charter carried all 23 of Viacom's channels in its most
affordable tier for years until a few months ago, when it began
relegating those networks to a more expensive package for new
subscribers.
Viacom, which suffered ratings declines of more than 20% over
the past four years, agreed to take a lower rate from Charter than
it had previously gotten, the people said.
The agreement is the second major carriage deal that Viacom has
inked under Chief Executive Bob Bakish, who took the helm late last
year. It reflects his strategy of focusing resources on six core
brands -- Nickelodeon, MTV, Comedy Central, BET, Nick Jr.,
Paramount Channel -- at the expense of many low-rated channels like
MTV Classic.
Under the preliminary deal, Charter would carry five of the six
core brands in its cheapest package -- Nickelodeon, MTV, Comedy
Central, BET and Paramount Channel -- as well as VH1, TV Land and
CMT. Nick Jr. would be in its midprice package, and the rest of
Viacom's channels would be on the most expensive tier, according to
the people familiar with the matter.
The companies still must finalize the pact, without which
Viacom's channels could go dark on Charter.
Mr. Bakish has been working on a turnaround of Viacom, and has
had some success with recent ratings improvements at channels like
MTV.
The outlines of the deal were reported earlier by Reuters.
For many years Wall Street banked on media companies getting
major fee increases in their carriage deals. But in the case of
Viacom, the top concern was ensuring that channels remained
available to the largest possible number of consumers. That is an
indication of how cord-cutting and ratings declines have reduced
the leverage of programmers such as Viacom.
Viacom had warned investors ahead of time that it was likely to
get less money from Charter this time around. J.P. Morgan analyst
Alexia Quadrani said she expected the fee that Viacom got from
Charter to "move down to [Time Warner Cable] rates given the gap
between historical Charter and TWC rates." Charter formally merged
with Time Warner Cable last year, forming the second-largest cable
company in the country. Large distributors typically pay less per
subscriber to carry channels than smaller ones do.
During tense carriage-renewal negotiations that stretched past
their Sunday deadline, Mr. Bakish warned Viacom's employees in a
memo that Charter wanted to insert a clause that would make it
impossible for Viacom to participate in an under-$20
entertainment-focused bundle of channels (without sports networks)
that the company plans to launch soon with other nonfiction
programmers such as Discovery Communications Inc. and A+E
Networks.
"This is an ultimatum that's impossible to accommodate," he
wrote.
In the end, this clause isn't part of the preliminary agreement,
according to the people familiar with the matter.
Ms. Quadrani said J.P. Morgan views "this agreement very
positively as it demonstrates the significant value of Viacom's
portfolio of networks and should remove a large overhang on the
stock as the company has no major contracts up for renegotiation in
the next 12 to 18 months."
Write to Keach Hagey at keach.hagey@wsj.com
(END) Dow Jones Newswires
October 18, 2017 19:16 ET (23:16 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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