Dish deal shows Viacom channels haven't lost their value, analysts say

The top media analysts have churned through the forensics of the carriage renewal deal between Dish (NASDAQ: DISH) and Viacom and the results are in: Viacom fared better than expected.

"While we were well aware that Ergen and Dish very much want to make their virtual MVPD, Sling, into an even more powerful/desirable service, we are surprised they were willing to pay meaningful increases to Viacom," said BTIG Research analyst Richard Greenfield, in a blog post. 

"Today's agreement throws cold water on the idea that Viacom's channels have lost their value," added MoffettNathanson's Michael Nathanson. 

Investors began circling the expiration of Viacom's Dish deal more than a year ago, with the expectation being that falling ratings and a deteriorated carriage condition would put the programming conglomerate in a difficult position in negotiations with a satellite operator known for its brinksmanship.

"As the bear narrative went, Viacom had a weak hand from languishing ratings and no truly 'must-have' content and would face increasing pressure from distributors," Nathanson said. "As a result, affiliate fees would be flat, decline, or even worse, see a precipitous fall if Viacom's channels were dropped.  The fact that Suddenlink and CableOne dropped Viacom's channels and are still performing OK (depending on your perspective) served as proof that Viacom wasn't core to the bundle, subscriber declines be damned."

Added Greenfield: "We assumed incorrectly that Dish moved up its conference call to prepare investors for dropping Viacom."

So what kind of deal to Viacom get? It was reported that the conglomerate got a five-year deal, but the analysts don't seem to have specifics on rate increases. Viacom gave Sling TV access to a number of its channels, but notably held back Nickelodeon.

The overall assumption is that the conglomerate made out OK.

"If Viacom had lost out to Dish, either caving on rate/packaging or being dropped, the consequences could have been dire," Greenfield said. "While [Viacom chief executive] Philippe Dauman is generally despised by investors, he does appear to have succeeded in a must-win situation."

All of this said, Viacom — which has been hurt more than most programmers by competition from streaming services — isn't out of the woods.

As Nathanson noted, Charter Communications (NASDAQ: CHTR) is going to step down the carriage rate it pays the conglomerate once it closes its Time Warner Cable (NYSE: TWC) deal, defaulting to TWC's lesser rate.

And Viacom still has flagging linear ratings to deal with. 

"Viacom is only 'kicking the can' down the road in terms of their problems if they cannot reinvigorate ratings and create compelling content that consumers cannot live without," Greenfield added.

For more:
- read this MoffettNathanson memo (sub. req.)
- read this BTIG Research blog post

Related articles:
Dish carves multi-year renewal for Viacom, extracts live and VOD rights for Sling
Dish's Ergen on Viacom deal: 'We're prepared to move on'
Viacom stock craters as programmer warns viewers of Dish blackout

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