DirecTV, Viacom standoff affecting 20 million customers heads into uncharted territory

NEW YORK -- It is one of the largest cable blackouts in the industry's history and analysts say they're not holding their breath for a quick resolution. Both sides have too much at stake in a fight affecting 20 million DirecTV customers.

Many industry watchers think Viacom will get some of the fee increase it's seeking, but not without a protracted battle -- and no one has any real sense of how long this could last. Cable skirmishes are common, but this one is a clash of titans, with both sides digging in hard.

Analysts say it's tough to forecast where that leads.

"I don't know how you predict that," says James Goss, a senior investment analyst at Barrington Research. "At the end, they have to make an agreement that they both can live with."

Nomura analyst Michael Nathanson wrote in a research note that he "would not be surprised" if the standoff lasts anywhere from 10 days to one month, in line with similar disputes in 2010.

Nomura's analysts believe that Viacom will ultimately get a fee hike of around 27% -- almost in line with the 30% boost that DirecTV says Viacom is requesting.

That would take DirecTV's monthly fee per Viacom subscriber to $2.85, by Nomura's estimates. That's still a slight break on the $3 average per-subscriber fee that Nomura thinks Viacom is getting from its affiliates.

The hike Nomura is forecasting would translate to roughly 60 cents per subscriber each month -- which squares with Viacom's statement that its proposed increase totals "a couple of pennies per day per subscriber."

The problem for DirecTV is that it can't easily recoup those higher costs by passing the increase on to its customers.

"It's hard for [DirecTV] to raise their prices much more than 3% to 4%, because the economy's bad and people's salaries are going up 1%," says Rich Tullo, a senior analyst at Albert Fried. "It's just not going to fly. Really, that's the issue at play."

This week's blackout has already prompted a flood of online venting from frustrated DirecTV customers, but the stakes will rise on Monday. That's when two of Viacom's most popular shows -- "The Daily Show" and "The Colbert Report" -- return from vacation and start airing fresh episodes.

Viacom usually streams those episodes on its website just a few hours after they air, allowing anyone -- even those without a pay-TV subscription -- to watch them for free. This week, however, it yanked of its most popular streams offline after DirecTV pointed out that its blacked-out customers could go watch Viacom shows on the Web.

"We've temporarily slimmed down our offerings, as DirecTV markets them as an alternative to having our networks," a Viacom spokesman told CNNMoney. "The online content is intended to serve as a complimentary marketing tool for our partners."

Viacom's spokesman declined to comment on how long it will keep its online streams blacked out. Its shows remain available on some outside sites like Hulu and Amazon.

Past fee fights like this have lingered for months -- or even years. One epic battle between Comcast and the Tennis Channel dragged on through three years and many courtroom skirmishes before the Federal Communications Commission intervened and ordered Comcast to deliver the channel to its 22 million subscribers.

The standoffs often involve some dramatic brinksmanship that puts customers straight into the crossfire.

In March 2010, 3.1 million Cablevision viewers missed out on the first 13 minutes of the Oscars telecast after a contract spat with Disney. A mere seven months later, those Cablevision customers were hit again after News Corp.'s Fox pulled its programming.

AMC is currently in a standoff with Dish Network. Earlier this month, right before their contract deadline, AMC broke into the season finale of Mad Men to air its grievances -- irking fans who missed out on part of the episode. AMC's shows are currently unavailable to Dish's 14 million subscribers.

Albert Fried analyst Tullo says Viacom and DirectTV have no choice but to eventually strike a peace treaty: "Both need each other. They'll come to a resolution."

Eventually. For now, the two sides are sniping like kindergartners. On Friday morning, DirecTV sent off a tweet: "We can't believe it's now Day 4."

Viacom quickly fired back: "It's actually Day 3. More fuzzy numbers from DirecTV!"


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