Charter Communications and Viacom announced a renewal of their program licensing agreement, avoiding what could have been a catastrophic blackout of the convalescing media giant on the third biggest pay-TV operator in the U.S.
Terms of the agreement were not disclosed.
"Viacom and Charter have reached an agreement in principle. Spectrum subscribers will continue to have access to Viacom’s networks, without disruption, while we finalize terms,” a joint statement said.
Viacom began warning Charter-subscribing viewers of MTV, Comedy Central, BET, Nickelodeon and its other channels that a deal deadline was approaching on Sunday of this past weekend.
Viacom has experienced a delicate resurgence under CEO Bob Bakish, but a blackout wouldn’t have been good for business. Analysts generally believe it would have hurt the media conglomerate, on the cusp of experiencing its first annual growth since 2011, much more than it would have dinged the No. 2 cable company in the U.S., which makes a larger and larger chunk of its revenue from residential broadband and business services.
“For Charter, we estimate a video sub generates approximately $16/month of profit contribution, whereas the Viacom networks cost about $3.15/sub/month (weighted average). Hence, if Charter believes they can drop Viacom, and not lose more than 16.4% incremental video subs, then they should drop Viacom,” wrote Bernstein Research analyst Todd Juenger in a note to investors Tuesday.
“With each passing year, the math moves in the direction of dropping networks, because video sub profitability is decreasing (as affiliate fees are growing faster than video ARPU),” Juenger added. “In fact, our math continues to show that, if nothing changes, average video sub profitability reaches $0 in the year 2023 (which is not that far away, especially when signing 5-year deals).”
It may be notable that in an internal Viacom memo leaked late last week, Bakish accused Charter of coercing programmers from doing deals for skinny bundles. That charge came after the American Cable Association accused Comcast of the largely doing the same thing. The ACA’s accusation went viral, with every two-bit tech blog posting about how Comcast was once again putting its proverbial pitchfork into consumer choice.
Sticking Charter with a similar viral PR crisis might have come in handy in a tense program licensing negotiation. But Bakish’s comment seemed to go largely unnoticed.
Of course, all is fair in love and carriage battle.