Denied Nickelodeon, DirecTV’s Youngest Clients Find Substitutes
Threats of television programming blackouts have become begrudgingly accepted by adults who know what these financial fights are all about.
But children accustomed to their daily dose of SpongeBob SquarePants are proving to be a bit more restless.
For the second week, Nickelodeon and its two smaller siblings Nick Jr. and Nicktoons, owned by Viacom have disappeared from DirecTV’s lineup, affecting would-be viewers across the country.
The two companies have not been able to agree on the amount of money that Viacom should receive from DirecTV for a bundle of its channels, including Nickelodeon, MTV and Comedy Central.
For the Disney Channel, Cartoon Network, the Hub and Sprout, it is the equivalent of a baby boom after a hurricane or a snowstorm. After all, while adults may have 500 channels at home, children only have a handful to choose from.
“The first two days were rough on my toddler,” Mary Pedone Howard wrote on the Facebookwall for Viacom, where hundreds have posted angry rants against the company (and against DirecTV). Now, though, when it is TV time, she said her daughter asks for the Disney Channel instead. “Leave it to a 3-year-old to show mom that adaptation is a great thing,” she wrote.
It will take months to determine whether there are long-term effects to this “forced sampling,” as another irritated parent, Brian Chisholm, called it on Facebook.
First, the blackout has to end, and on Wednesday, there was no new sign of light. On Wednesday afternoon Derek Chang, an executive vice president of DirecTV, said that “we’re exchanging ideas” with Viacom in “multiple calls every day.” But Denise Denson, his counterpart at Viacom, said in a telephone interview a few minutes later that the two companies were at an impasse. Her daily calls with Mr. Chang, she said, are short and insubstantial. “We don’t see an end in sight to the blackout,” she said.
Blackouts of cable channels are rare, and when they do happen, they tend to be resolved within hours, not days.
“I’ve never seen a situation like this. The outage has lasted so long and it’s so broad,” said Sandy Wax, the president of Sprout, a channel for children backed by NBCUniversal and the Public Broadcasting Service. DirecTV made Sprout, which was already available to most of its subscribers, available to all after the blackout started.
“We don’t relish this happening to anyone,” Ms. Wax said in an interview. But “the idea that more customers are going to be able to sample us,” she admitted, “that’s a positive for us.”
She added, “Hopefully they’ll come back after all the dust settles.”
About 2.5 million people are typically watching Viacom’s children’s channels at any given time, according to Nielsen. The flagship Nickelodeon started to see a drop-off in viewership late last year, causing alarm at the highest levels of Viacom. The reasons for the declines continue to be debated, with some citing a lack of new hit shows and others blaming the Web streaming of shows like “SpongeBob SquarePants.” But it is clear that the dispute with DirecTV has deepened the channel’s ratings decline.
On July 10, the day before the blackout started, 1.76 million viewers were watching Nick during the day, according to Nielsen. On July 11, that average dropped to 1.23 million, a drop of 30 percent overnight. DirecTV distributes TV to about 20 percent of the households in America that pay for cable or satellite TV.
The Disney Channel, which had already been gaining on Nickelodeon, seemingly picked up some of the disappearing audience, though it is hard to draw a direct connection between the DirecTV blackout and the Disney gains.
“Disney has been gaining share, anyway,” Todd Juenger, an analyst at Sanford C. Bernstein & Company, wrote in a note to investors on Tuesday. “Certainly some percentage of kids (and moms/decision makers) will get hooked on Disney programming and stay with it.”
In the first six months of the year, the Disney Channel had about 1.64 million viewers at any given time. In the first five days of the DirecTV blackout of Viacom programming, it had about 2.27 million viewers.
Smaller channels for children have seen sharp gains, as well. The Hub, a relatively small player in the space co-owned by Discovery Communications and Hasbro, had about 88,000 viewers at any given time earlier this year, and about 159,000 viewers since the blackout took effect. Sprout had about 153,000 viewers before the blackout, and about 264,000 since.
A few days after the blackout began, DirecTV announced carriage of another channel for children, Disney Junior. Representatives for Disney declined interview requests on Wednesday. But they were more than happy to share ratings data about the success of their channels.
Mr. Chang, too, noted in an interview that “Disney is obviously gaining quite a bit from Nick.” DirecTV has helped, by replacing Nickelodeon in its lineup with interactive links to alternative channels for children. “A lot of viewers are saying, ‘I found stuff I didn’t know existed, and this is great,’ ” Mr. Chang said.
Ms. Denson of Viacom said she was not surprised that Nickelodeon and the other channels had sagged in recent days. “In the short term, we will endure ratings issues,” she said. “But in the long term, DirecTV will endure long-term asset loss from customers leaving or customers never coming on in the first place.”
Maybe, maybe not. In the meantime, just try explaining a corporate spat to a 5-year-old.