20M DirecTV subscribers lose 17 Viacom channels in dispute

— -- DirecTV's 20 million satellite TV subscribers have lost 17 channels produced by Viacom in a dispute about the fees paid to broadcast the media company's programs.

Late Tuesday night, the satellite service removed BET, Comedy Central, MTV, Nickelodeon, Spike and VH1 because contract talks with Viacom had reached an impasse.

Viacom sent DirecTV a letter on Tuesday ordering the pay-TV provider to "remove the channels by midnight or face legal action," said Derek Chang, DirecTV's executive vice president of content, strategy and development in a statement sent out late Tuesday.

The satellite provider hoped to continue transmitting the channels as the two sides continued their negotiations, he said. DirecTV said Viacom is seeking a 30% increase in fees, which would amount to an additional $1 billion. Chang noted that "ratings for many of (Viacom's) main networks have plummeted, and much of Viacom's programming can be seen for free online."

Viacom countered, saying that DirecTV has been paying "the same bargain rate" for its programming for seven years. Viacom is the top programmer on the service and Nickelodeon is the most watched individual channel on DirecTV, Viacom says, with 20% of viewers watching a Viacom channel at any given time.

The media company wants an increase that amounts to "a couple pennies per day, per subscriber," wrote Mark Jafar, Viacom's vice president for corporate communications on the company's official blog (blog.viacom.com).

Both sides charge the other with dropping the ball on negotiations. This morning, Denise Denson, Viacom executive president of content distribution and marketing, said that "the last time we spoke with DirecTV at 11 a.m. (Tuesday) morning … there were no new ideas offered for resolution. In fact, the last proposal DirecTV had made was lower than anyone else pays in the industry, and a deal we said we would not do out of fairness to other distributors. … We are ready to talk at any time."

For now, DirecTV subscribers who tune to a Viacom channel get a "mix" channel of alternate programming such as Bravo, FX and TBS. Also airing on the service is a video of DirecTV CEO Mike White, who says that he has been in negotiations with Viacom for several months about "how much of your bill is fair to pay for their networks. Unfortunately, Viacom has decided to take their channels away from our customers. It is a temporary and regrettable tactic to try to force you to pay substantially more for all their networks. Even the ones you don't watch or care about."

He adds that "both sides will come to an agreement, so please ignore any of their scare tactics."

To appease viewers, DirecTV is making eight Encore movie channels (usually available in only the higher-price subscription tiers) viewable for free on channels 535-542 until July 31. .

This is the latest dispute to affect pay-TV subscribers. Still unsettled is a dispute that resulted in Dish Network's 14 million users losing AMC, IFC, Sundance and WE TV channels last month. Two years ago, DirecTV and Versus settled a seven-month stand-off just before the Comcast-owned sports channel was to begin broadcasting National Hockey League Stanley Cup playoffs. Versus was renamed the NBC Sports Network earlier this year.

Cable TV networks are not immune. Time Warner Cable had to remove the MSG (Madison Square Garden) network last season, which broadcasts the New York Knicks, for more than a month during the ascent of New York Knicks guard Jeremy Lin.

With the growth in popularity of Internet-based TV services such as Netflix and Hulu, the pay TV-network landscape is rapidly changing. That could mean many more transmission fee disputes to come, says Phil Swann on his blog TVPredictions.com.

"Today's economic realities — combined with an explosion of new services where viewers can watch almost any show online, including some for free — has changed everything," he says. "The networks' greed, the quest to generate revenue from every possible source, has come back to hurt them in their effort to wring more dollars from the pay-TV providers."