Tuesday, July 17, 2012

DirecTV vs. Viacom

In a titanic chest-bumping contest, 20 million consumers have been gypped out of some popular channels operated by mega-company Viacom, such as MTV, BET, Comedy Central, and Nickelodeon. Now, the bright side is that Jersey Shore is unavailable to DirecTV customers. You don't have to worry about your brain cells being drained if you inadvertently land on the show while your remote dies.

Both Viacom and DirecTV have launched campaigns blaming each other for the loss of channels. DirecTV claims that Viacom wants way more money than its channels are worth. Viacom claims that its content is in demand and is a major selling point for DirecTV, and are therefore owed some more compensation for their content.

This business-to-business dust up is common enough, and normally, if DirecTV didn't want to pay for content, that's their right. However, 20 million consumers are caught in the middle of something they have no control over, are getting the short end of the stick and are stuck in contracts. Consumers signed up for a service that is now lessened by a feud that they weren't informed of. Now, they may be gypped out of their favorite shows.

Customers are looking for someone to blame. As much as DirecTV would like to redirect ire to Viacom, it's not working. Customers did not sign up for services with Viacom. They have a contract with DirecTV and expect it to be upheld. DirecTV must believe they are doing what is economically viable. They must really believe that Viacom's programming is simply not worth what they were demanding, otherwise, this situation would not have come to pass. They probably did the right thing for their business. It doesn't matter to DirecTV customers, and it shouldn't. They were gypped.

DirecTV's response to Viacom's campaign for the hearts of customers is bad. Claiming that Viacom's demands directly result in an increase in cost to customers is nonsense. That argument is always nonsense. Companies aren't forced to "pass along costs to customers." They have to make a choice between a dent in profits and passing along costs. They always seem so innocent in the fact that they raise costs, like they're utterly helpless to prevent it. DirecTV's profits increased last year. They made $1.21 billion net profit last year. They don't have to pass along the extra costs to consumers. They would choose to do so.

Was it worth it to Viacom to demand more money? They made $2.25 billion net profit last year, almost twice as much as DirecTV. Did they think this maneuver would force DirecTV into agreeing to a bad deal because customers would hold them responsible? Maybe. But, now their shows aren't even available to millions of people. That's not good for them.

DirecTV doesn't need to placate Viacom, but they do need to placate their customers, who are locked into contracts they don't feel don't reflect what they were sold. Even if DirecTV could outline, in abundant and convincing detail, why Viacom is wrong, unethical, money-hungry and terrible, that won't change the fact that DirecTV has done little to prepare its customers for the drop and nothing to comfort them during their frustration. Now, we wait and see how many complaints the Better Business Bureau will receive against them.

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