Although his comments didn't rise to the level of inflammatory rhetoric he's often known for, Dish Network chairman and CEO reminded investors Monday that Dish's (NASDAQ: DISH) pending talks with Viacom are pay TV's most anticipated upcoming carriage negotiation for a reason.
Speaking to investment analysts and media during Dish's Q1 conference call, Ergen tried to strike a diplomatic tone, rehashing an earlier messaging point jointly developed with Viacom: Viacom is the distribution agent for movie platform Epix and earlier this year managed to successfully carve out a wide-reaching carriage agreement for the network on Dish that includes distribution on OTT service Sling TV.
From there, however, Ergen struck a more threatening tone, indicating that proliferation of Viacom programming on SVOD services is going to be an issue.
"Obviously, the distribution of their content is a bit more diluted now that, if you're a Netflix (NASDAQ: NFLX) customer, you can watch SpongeBob and you don't place as big a value on the linear side," Ergen said. "It depends on the strategic direction of how content players go. But Viacom is fairly well distributed on most platforms, so we have to take that into consideration when we look at our own platform."
Viacom has struggled mightily of late, suffering multiple whammies of a reduced ad market and declining linear ratings. The conglomerate, which took a $784 million write-down in early April, mainly on archival programming that now has little value in the linear universe, is trying to refocus its business on fresh original-programming hits and the strategic launch of its own SVOD products.
Despite unresolved carriage disputes with small cable providers, the biggest being CableOne and Suddenlink, Viacom has secured long-term pay-TV carriage agreements with 70 percent of the U.S. market.
Viacom's investors, however, are anxious about the upcoming talks with Dish, which has lately dug in its heels on renewal talks, resulting in brief blackouts on its service of nearly 14 million pay-TV subs for programmers including Fox News and Turner Networks.
While not specifically addressing Viacom Monday, Ergen didn't strike a comforting tone for the conglomerate's backers, saying the leverage in content-licensing talks has shifted more to the pay-TV side.
"In general, the tail has moved a little bit more in the distributors' favor," he said. "The content owner still has some advantages, and is probably a little stronger in negotiations than a distributor … but there comes a tipping point for content providers when it's a $100-a-month [consumer price]. … There are channels that are top-12 channels [in Dish's linear bundles] that Sling doesn't have, and [Sling] customers aren't asking for them for the most part."
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