DirecTV/CBS O&Os pact aids MTV nets

Sat service pays big for contract extensions, EchoStar lags

By JOHN DEMPSEY

NEW YORK — DirecTV could end up funneling more than $2 billion to Viacom’s MTV Networks in the next decade as part of a blanket deal that includes carriage by DirecTV of all CBS-owned TV stations.

In order to obtain the rights to the Viacom-owned CBS O&Os, sources say DirecTV was grudgingly willing to pay big premiums for contract extensions to MTV, Nickelodeon, VH1, TV Land and MTV clones MTV2 and MTVS. DirecTV, the largest direct broadcast satellite distributor in the U.S., also agreed to buy the Nickelodeon spinoff Noggin for its entire subscriber base of 8.5 million.

But, despite the high cost, a DirecTV spokesman expressed relief that, with the CBS O&Os coming on board, DirecTV has now locked up deals for all of the owned TV stations of the Big Four networks.

Deadline looming

The timing is crucial, because DirecTV’s main satellite TV competitor EchoStar has a deal only with the Fox O&Os so far. The deadline imposed by the federal government is May 29: EchoStar, which reaches about 3.8 million satellite dish owners, would have to remove the signals of the TV stations owned by ABC, CBS and NBC if there were no signed contracts with these networks. A spokeswoman for EchoStar says the company is in deep negotiations with all three of the networks and will announce some deals within the next few days.

DirecTV and EchoStar have carried the local TV signals of the Big Four O&Os since November as part of the Satellite Home Viewer Improvement Act. The act gave satellite distributors six months from November to strike deals with the networks (retransmission consent, in the industry jargon).

In the Viacom deal, DirecTV will continue to transmit 16 CBS O&Os in cities covering 35% of the U.S. viewing audience, including WCBS New York, KCBS Los Angeles and WBBM Chicago.

Sources say DirecTV’s contracts with the networks make it clear that no cash is changing hands for carriage of the owned TV stations. Instead, DirecTV has compensated the broadcast networks by agreeing to take new cable networks or services, such as Soap Net from ABC, Fox Sports World from Fox and a cable Olympics package from NBC.

By not paying cash for retransmission of the TV stations, one insider says, DirecTV can resist cash demands by TV stations affiliated with the Big Four networks, but not owned by them. DirecTV can compensate these affiliates by, for example, agreeing to spend extra advertising dollars on the stations promoting DirecTV’s satellite offer to consumers.