Nearly 1.1 million Suddenlink subscribers may lose Viacom channels if the two companies can not come to a carriage agreement by the end of business September 30, 2014. Viacom says that its networks have been underpaid for years, and is seeking valid increases in its carriage fee income. Suddenlink claims that significant carriage fee increases don't make sense given declining viewership for Viacom's networks.
If the two sides can't come to an agreement, the loss of the channels for Suddenlink subscribers will be the second such loss recently. In April, Viacom was unable to resolve a similar dispute with mid-tier cable operator CableOne, resulting in the loss of more than 500,000 subscribers for its networks. However, the loss of the Viacom networks likely contributed to the worst quarterly loss in CableOne's history, when it dropped 34,300 subscribers, 6.5% of its total.
If the channels go dark for Suddenlink, IHS believes that there will be some subscribers who will seek pay TV services from other providers. Unlike CableOne, which suffered from other performance issues, Suddenlink has been executing its strategies with more positive results.
Suddenlink's performance is more in-line with the performance of other cable operators, it showed nominal declines in quarters 1,3 and 4 and moderate losses in Q2, largely influenced by seasonality. It remains to be seen if CableOne will recover from the acute loss in Q2 2014, and it is likely that if the channels remain black that Suddenlink will experience a similar decline. However, Suddenlink has an ace up it's sleeve.
By joining the Gigabit club, Suddenlink hopes that it can attract new subscribers and retain existing double play video-plus-broadband customers. The company intends to roll out gigabit service across its entire footprint within three years, a very ambitious plan. The addition of gigabit speed to its network makes for a nice headline, but realistically it isn't going to be a significant draw for the average customer.
At the same time Suddenlink is making forays into the TV Everywhere space. Currently the company has deals with 67 cable/broadcast/premium networks which allow it's subscribers to authenticate to the network's web portal or app. Like other cable operators it isn't betting the farm on one play or another, instead spreading its resources across many fronts.
One possible alternative Suddenlink has if it loses Viacom networks is its recent partnership with TiVo that allows for Netflix access on TiVo boxes leased by Suddenlink. A large portion of Viacom's kid-friendly content can be substituted through Netflix, but kid-friendly content is only a part of Viacom's vast portfolio. It likely wont play a significant role in retaining customers that are likely to jump ship to another operator, but it may help mitigate such an exodus.
It is likely that the company will suffer from the loss of Viacom's networks, if it comes to that, but the loss will likely be lessened thanks in part to the company's efforts in increasing its broadband speeds and its TV Everywhere efforts.