• by Wayne Friedman , March 21, 2019

Potential Viacom channels being dropped from DirecTV could have a major multibillion-dollar effect on the network group in terms of advertising and afffiliate revenue, says one analyst.

Todd Juenger, media analyst at Bernstein Research, writes in a note: “Viacom would potentially lose $1 billion [per year] of affiliate revenue and $1 billion of advertising revenue. There would be very little offsetting costs.”

Viacom says a new distribution deal with DirecTV is in jeopardy, possibly resulting in more than a dozen channels dropping off the satellite TV provider. There is a Friday deadline.

AT&T’s DirecTV, with 19.2 million subscribers, has a major 25% share of U.S. pay TV homes, second only to Comcast Corp. which has 22 million.

For its most recent full-year period, Viacom earned $3.9 billion in domestic affiliate fees and $3.6 billion in U.S. advertising.

Some of the negotiation with DirecTV may come from considering TV viewership of Viacom networks. Juenger says: ”We estimate Viacom audiences are down 50% since 2011 (versus total industry down 40%), but affiliate fee payments are down only 2% since 2014.”

Viacom has 23 channels overall -- 11 channels on DirecTV’s basic entertainment package, as well as other networks on more expensive packages. Plus, there are Viacom channels on AT&T’s fiber-based U-Verse and AT&T’s low-cost “Watch TV” service.

One estimate is that more Viacom networks on DirecTV could moved to higher consumer-priced “pay” tiers.

This happened when Charter Communications struck a new distribution deal with Viacom in 2017. Charter moved eight core Viacom networks (Nickelodeon, BET, MTV, Comedy Central, Spike, VH1, TV Land and CMT) back to the basic package, but also put 11 of Viacom's smaller networks on higher pay tiers.

Juenger says another possible result of new DirecTV deal could be the creation of a new kids TV network tier.

“If Viacom is so concerned about choice and products with lower price points, then why continue to force all households to pay for kids channels, when only 40% of U.S. households have a presence of children, and only a small and declining fraction of them are watching linear kids networks?”