While some investment analysts have predicted that carriage renewal talks between Dish Network (NASDAQ: DISH) and Viacom will break down, Evercore's Vijay Jayant thinks both sides have too much to lose to wage a protracted blackout battle.
Writing to investors, Jayant conceded that the talks are likely to be "contentious," but said he expects a new carriage deal to be in place by the first quarter of 2016.
"We assume Dish will be a tough negotiator again in trying to keep a lid on renewal step-ups in the carriage fees," the analyst said. "However, we expect them to ultimately agree with Viacom and continue carrying its suite of networks, as we assume Dish will want to populate its Sling TV OTT service with more content options."
He added that after losing 81,000 subscribers just in the second quarter, Dish can ill afford the toll of a channel blackout that would keep MTV, Nickelodeon, Spike TV, VH1 and Comedy Central, among other networks, off its program guide.
For its part, Viacom enters the talks with a bit of momentum. The conglomerate has gotten some relief recently from the steady drumbeat of steep linear ratings declines that it has been enduring for several years. Further, Jayant notes that the programming conglomerate enters talks with some "price flexibility," given that only a select number of its channels have "Most Favored Nation" clauses attached to them that dictate how much Dish should pay to license them.
Lacking live sports and enduring massive ratings declines for channels like Nickelodeon, Viacom has been notoriously cast off the program guides of smaller cable operators including Suddenlink and Cable One.
However, it has multi-year agreements carved out with most of the major operators, save for Dish.
Dish, though, is known to drive a hard bargain with programmers down on their luck, evidenced by its rhetoric-fueled talks with Turner Networks late last year.
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