The implications of Dish and Viacom's contract negotiations (DISH, VIAB)

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Negotiations to renew Viacom's programming on Dish's satellite network reached their deadline at midnight last night, Variety reports.

The impasse in the negotiations was driven by the fact that Viacom is asking for a substantial increase in fees in spite of widespread declines in TV viewership. This is not the first time that Viacom has found itself at the mercy of a cable service provider. In late 2014, the cable operator Suddenlink dropped Viacom's content after Viacom asked for a 50% increase in payments.

The drawn out negotiations between Dish and Viacom have important implications about the current TV landscape:

• Decreased leverage for TV networks. Online streaming services like Netflix have greatly reduced the bargaining power of traditional TV networks. The advent of the internet has caused consumers to ditch their traditional TV subscriptions in favor of these new stand-alone streaming services, which are cheaper, more convenient, and personalized. Traditional TV channels no longer attract the same viewership they once did. Lackluster demand translates into a decrease in potential ad and subscription revenue for companies like Viacom and Dish.
• Interdependence of TV content providers and broadcasters for survival. Despite the decline in traditional TV viewership, Viacom programming remains extremely popular among US audiences. In fact, 76% of TV viewers in the US watched at least one Viacom-owned network in February, according to Pivotal Research data cited by Digital Trends. If Dish were to lose Viacom channels, this could cause subscribers to move to a new satellite network. On the other hand, Viacom stands to lose access to Dish's 13.9 million subscribers, which would represent a tremendous loss in ad revenue for the company.
• Potential for new and lower price equilibrium. TV networks nationwide would cry foul if Viacom decreased prices for Dish. That could prompt other networks to renegotiate their content licensing deals as well. This could spark a downward spiral for content-licensing fees going forward, with pricing to acquire TV programming reaching a new, lower equilibrium in the coming years. 

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