DirecTV and Viacom win; consumers lose

It appears that DirecTV and Viacom have settled their protracted dispute over what DirecTV will pay to carry Viacom programming, including channels like Comedy Central, MTV, Nickelodeon, Spike, and BET.  The battle had culminated in a nine-day blackout of Viacom channels for DirecTV subscribers.  With the settlement, service has now been restored. But the deal comes at a price, and much of it will be paid by people who don’t even subscribe to DirecTV.

For Viacom, the problem was money: specifically, their insatiable desire for more of it.  Video programmers like Viacom have been demanding — and getting — sharply increased fees for their programming. Over the past few years, the cable companies have paid nearly 8% more per year for programming, and they’ve passed much of that along to their subscribers in the form of higher cable bills. As a result, over the past decade, the average cable bill has risen by about 6% a year — more than twice the rate of inflation. And consumers are starting to rebel: a recent report by an industry consulting firm found that 2.65 million Americans canceled TV subscriptions between 2008-2011 in favor of lower-cost internet subscription services or video platforms.

This burgeoning trend of “cord-cutting” is what the cable and satellite companies fear most.  And so they are doing everything in their power to try to stop it.  The DirecTV/Viacom settlement is an example.  Under the agreement, popular Viacom shows will become more widely available to DirecTV subscribers via a subscription-only online site.  So DirecTV customers will be able to access their favorite programs online. But the rest of us may be out of luck. At least if we can believe Derek Chang, the executive vice president for DirecTV who led DirecTV’s negotiations with Viacom.  Immediately after concluding the deal with Viacom, Mr. Chang gave a quote that made clear what he thought DirecTV had gained: “My expectation,” Mr. Chang said, “is that [Viacom] will not increase the amount of free programming they have online.”

So don’t look for Viacom to be expanding its offerings on Hulu and Netflix.  Or on its Comedy Central website. And given the logic of their deal with DirecTV, I wouldn’t be surprised if the amount of Viacom programming available online actually shrinks. Pay close attention, Stewart and Colbert fans.

So, is there a problem here?  Definitely.  As cable companies collude with programmers to drive up consumers’ monthly cable bills, while restricting the availability of programming via lower-cost online services like Hulu and Netflix, we all know what the response is likely to be — more piracy. We don’t condone that.  But in a world where piracy is the inevitable response to greedy, restrictive strategies like we see at play in the DirecTV/Viacom deal, perhaps we should be a bit more skeptical when the cable companies and programmers turn up in Congress complaining.