Dish CEO Sees Path to Agreement With Viacom on Fee Dispute

  • Viacom shares jump on optimistic comments about negotiations
  • MTV, Nickelodeon may be taken off satellite network Wednesday

Dish Network Corp. Chief Executive Officer Charlie Ergen said negotiations with Viacom Inc. have become more positive in tone, raising speculation the satellite-TV service will continue carrying channels like MTV and Nickelodeon.

If an agreement isn’t reached by midnight Wednesday, Dish will take Viacom’s networks off the air, Ergen said on a conference call. “I think that the tone on both sides -- both Viacom and at Dish -- has been more productive through the weekend and this week, and so there actually probably is a path to continue carriage,” he said Wednesday. “But it’s not done yet, and obviously the devil is in the details.”

Viacom shares jumped as much as 4.9 percent. They were up 2.1 percent to $36.39 at 2:57 p.m. in New York. Dish rose less than 1 percent to $47.42.

“Hundreds of thousands of concerned subscribers have reached out to implore Dish to negotiate reasonable terms,” Viacom said in a statement. Viacom networks represent “nearly one-fifth of cable viewership on Dish,” giving the satellite carrier incentive to get a deal done, the media company said.

A breakup with Dish could take a toll on an already challenged Viacom, which has struggled with ratings declines on cable and lackluster box-office results from its Paramount studio. An exit from Dish would jeopardize about 13 percent of Viacom’s revenue from advertising and payments from pay-TV companies, Todd Juenger, an analyst with Sanford C. Bernstein & Co., said in a note Wednesday. The fallout could take the stock down to about $28, Juenger wrote.

Cable networks have long had the upper hand in standoffs with pay-TV providers like Dish because viewers complain and threaten to switch to competitors when a channel is taken off the air. But Ergen said he’s seeing a possible sign that industry negotiations over programming prices have started to “be a fairer fight.” He pointed to Time Warner Cable Inc.’s SportsNet LA and 21st Century Fox Inc.’s YES Network as cable channels that pay TV providers have successfully rejected as too expensive.

Cable networks must move beyond negotiations over price to work with companies like Dish on different options to reach viewers as the industry changes, Ergen said. The company’s SlingTV online service has deals to carry channels from Walt Disney Co. and Fox.

“You can put your head in the sand. Or you can go out and say the world is changing, let’s go change with the world. Let’s try to be innovative. That’s what we’re trying to do,” Ergen said on the earnings call.

Faced with a loss of viewers to Internet services such as Netflix Inc., cable programmers like Viacom are seeking to increase the per-subscriber fees they get from pay-TV distributors including Dish. Dish is the third-largest pay-TV distributor after AT&T Inc. and Comcast Corp., with about 13.9 million subscribers.

Viacom’s channels tend to be more youth-oriented and attract fewer prime-time viewers than the most-popular cable networks, such as Fox News and ESPN. Its best-performing network this year is Nick Jr., up 37 percent according to Nielsen audience ratings, while its worst, Comedy Central, has declined 19 percent this TV season. Two small cable operators, Suddenlink Communications and Cable One Inc., dropped Viacom in 2014.
Dish and Viacom have been negotiating a long-term extension for months, and previously agreed to temporary extensions.

Viacom’s last blackout was with DirecTV for 10 days in 2012. Ergen hinted that a standoff with Dish might not be so temporary.

“If they go dark, they go dark,” Ergen said.

“If we can’t work together as companies on strategic things,” he said, “I’d rather spend my time with companies who are a bit more forward-thinking.”

Before it's here, it's on the Bloomberg Terminal.