Photographer: Patrick T. Fallon/Bloomberg

Dish, Viacom Reach New Programming Deal, Averting Blackout

  • Channels will also be carried on Dish's Sling TV service
  • Viacom shares surge as much as 13% in New York trading

Dish Network Corp. and Viacom Inc. reached an agreement on new payment terms that will keep channels like Comedy Central, MTV and Nickelodeon on the satellite-TV service and make them available on Dish’s online Sling TV service.

The companies came together on a deal after an extended negotiation, according to a statement Thursday, averting a threatened blackout for Dish’s 14 million subscribers. The agreement covers all 18 Viacom channels, including VH1, Spike, BET, CMT, TV Land, Nick Jr. and Nicktoons. Financial terms weren’t disclosed.

Viacom’s networks will also be carried on Dish’s Sling TV streaming services in the coming months, the companies said, without providing details.

Shares of Viacom rose 14 percent to $42.56 in New York, their biggest single-day increase since October 2008. The advance helped push the stock up 3.4 percent for the year. Dish, based in Englewood, Colorado, climbed 1.4 percent to $48.10.

“The deal certainly takes away the most major bear case on this name,” Stifel Nicolaus & Co. analyst Benjamin Mogil said in a research note. He has a buy rating on the stock.

Disputes between pay-TV providers and media companies over subscriber fees have intensified in recent years. Program suppliers seek higher carriage fees to offset rising production costs and sluggish ad revenue. TV distributors like Dish have been battling rising content costs that drive customer bills higher and push subscribers to cheaper alternatives like streaming videos from Netflix Inc. and Amazon.com Inc.

In its threat to pull its channels, New York-based Viacom said its shows account for about 20 percent of viewership on Dish and that the satellite service would suffer more customer losses as viewers find the programs on other outlets.

“Neither side can afford not to do a deal,” said Doug Creutz, an analyst at Cowen & Co., who has a market perform rating on the stock, the equivalent of a hold. “Viacom’s argument for why you can drop its channels is that, in aggregate, they deliver a lot of viewers. That works reasonably well."

Viacom will be at risk in future negotiations if it doesn’t improve the performance of some of its channels, Creutz said.

Relief for Viacom

Dish Chairman Charlie Ergen said Wednesday that he saw a path to an agreement and threatened to black out Viacom channels permanently if a deal wasn’t reached.

A breakup with Dish would have taken a toll on an already-challenged Viacom, which has struggled with ratings declines on cable and lackluster box-office results from its Paramount studio. Chief Executive Officer Philippe Dauman said he’s looking to sell a slice of the storied studio, a crown jewel of the movie industry that produced “The Godfather” and “Raiders of the Lost Ark.”

The accord “likely allows the company more flexibility in its options regarding Paramount,” Mogil said.

Mid-single digit annual increases in fees would be a win for Viacom, said Paul Sweeney, an analyst at Bloomberg Intelligence.

“The days of high single digit to low double increases are likely over for most programmers,” Sweeney said in an e-mail.

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