
DIRECTV (DTV) and Viacom (VIA) have reached an impasse, and things are starting to get ugly.
It has now been more than a week since customers of the country's largest satellite television provider have been without Viacom's roughly two dozen channels. Most of the networks are obscure enough that customers may not even notice the blackout, but Viacom's three biggest channels -- Nickelodeon, Comedy Central, and MTV -- are widely popular.
Things seemed to be coming to a welcome resolution on Tuesday, but it all came undone on Wednesday.
Viacom issued a statement on Wednesday, calling out the tactics of the satellite television provider with nearly 19 million customers.
"DIRECTV has moved backwards significantly and created more obstacles to reaching an agreement," Viacom claims.
Realizing that Viacom was taking the battle public, DIRECTV provided some color on the negotiations.
A spokesman for the company issued a statement to explain that DIRECTV had reached an agreement with Viacom in principle on Tuesday, but that the media mogul demanded that DIRECTV also shell out another $500 million to carry the Epix movie channel.
"We know our customers don't want to pay such an extreme price for an extra channel," DIRECTV concludes.
Well, by Wednesday night Viacom was calling the $500 million ransom for Epix a "complete work of fiction" on DIRECTV's behalf.
Make This Worth It
We've seen these bundling negotiations before. Cablevision (CVC) customers in New York missed New York Knicks games at the peak of the now-moot Jeremy Lin craze because Madison Square Garden (MSG) wanted the cable provider to also pay up for another obscure channel.
Even when we're discussing the 26 Viacom channels at stake here, obviously customers don't want to pay for all of them. Channels including TV Land, BET, and CMT certainly have their niche audiences, but most DIRECTV subscribers probably don't spend any of their viewing time watching them.
The cable industry is in for a rude awakening. The loser in this battle right now is the customer, but it will eventually be both DIRECTV and Viacom. Sooner or later, this model will be exposed as flawed. Consumers will be able to cherry-pick the channels that they actually are willing to pay for. If MTV's Jersey Shore and its stable of other programs don't appeal to you, you won't buy it.
It's only a matter of time before that happens. DIRECTV subscribers simply have a little more time to ponder that inevitable reality now while they wait for the return of the one or two Viacom channels that they actually watch.
Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Madison Square Garden.