AT&T’s fight with CBS and Nexstar

Telecom company AT&T (T) is currently facing a carriage fee dispute with station owners Nexstar Media as well as CBS (CBS). AT&T has not agreed to the terms of the broadcasters. Therefore, it might face a blackout of CBS and Nexstar channels on its DIRECTV NOW, DIRECTV, and U-verse TV service.

Nexstar’s local channels including ABC, CBS, NBC, Fox, and The CW have been part of the blackout since July 4. Reportedly, CBS might also pull its CBS-owned local CBS stations by July 19 if the telecom company does not settle to the terms.

AT&T Might Face Blackout of CBS and Nexstar Channels

AT&T’s carriage dispute with CBS

According to CBS, AT&T is reportedly not ready to negotiate like other cable and satellite service providers for CBS programming. Instead, AT&T is demanding unfair terms, unlike its competitors.

CBS thus warned AT&T on Tuesday to settle the dispute to avoid a blackout of CBS-owned channels. Notably, AT&T’s current carriage agreement with CBS is set to expire at midnight Pacific Time on Friday. The AT&T-CBS blackout issue would affect many markets, including New York, Chicago, Dallas, San Francisco, Boston, and many others.

AT&T disagrees with higher fees

The telecom giant AT&T wants to keep CBS programming on its cable and satellite services. However, it is not in favor of paying higher carriage fees for the channels.

AT&T has reportedly urged its customers to use “CBS All Access,” the CBS streaming-video service, if stations go dark on either U-verse or DIRECTV. Customers can access CBS favorites or use new apps and also watch the websites of various CBS stations on “CBS All Access.”

Notably, AT&T customers also have an option to receive local channels on DIRECTV and its U-verse cable service through Locast during a channel blackout. AT&T has recently donated $500,000 to Locast, which is a non-profit organization and offers free streaming of broadcast TV channels in the local markets. The service is available in 13 cities, including New York, Los Angeles, Dallas, and Washington, among others.

Other carriage disputes

Like CBS, AT&T is also facing a similar carriage dispute with the number two local TV company, Nexstar Media. AT&T is currently in talks with TV-station owner Nexstar to resume the channels that went dark on DIRECTV and U-Verse for around two weeks.

In the past too, AT&T had a carriage dispute with Viacom (VIAB). However, AT&T negotiated with Viacom on March 25. The settlement helped AT&T to get back Viacom’s 23 stations like MTV, Comedy Central, and Nickelodeon, on AT&T’s platform.

Apart from a service provider, AT&T is also an owner of premium channels like HBO, TBS, and CNN. AT&T is undergoing a carriage fee dispute with Dish Network (DISH). The company has withdrawn its premium HBO channel since October 2018 from Dish customers. The disagreement between Dish and AT&T for its HBO and Cinemax channels resulted in DISH TV’s subscription losses during the first quarter. HBO and Univision accounted for little less than half of the total net losses of 259,000 pay-TV subscribers in Q1 2019.

AT&T attacks broadcasters like CBS and Nexstar

According to AT&T, broadcasters and content providers demand unreasonably higher fees from cable and satellite service providers for the channels offered.

In a statement to Deadline, AT&T said that “We are fighting on behalf of our customers in these negotiations with broadcast station owners and national networks.” AT&T further stated that “Customers today are demanding more value from their TV offerings. We must convince companies like CBS and Nexstar to accept the same call to action that our own TV customers have made clear.”

We believe the practice of charging higher fees makes no sense nowadays as consumers seek more content and value from its TV offerings. Customers are also increasingly shifting to cheaper streaming TV services provided by streaming giants like Netflix, and Amazon, among others.

Companies losing pay-TV customers

Pay-TV company AT&T is struggling with declining viewership due to cord-shaving and cord-cutting. In Q1 2019, AT&T lost a net 544,000 premium TV subscribers (including DIRECTV and U-verse customers). At the end of March, DIRECTV served around 22.4 million traditional TV customers. AT&T’s live-streaming service DIRECTV Now had 1.5 million subscribers.

In addition to AT&T, cord-cutting is significantly hurting the pay-TV subscriber growth of traditional cable companies including Dish Network, Comcast, and Charter Communications.

Dish lost 259,000 pay-TV subscribers in Q1 2019, more than double the losses of 94,000 subscribers in the year-ago quarter. Comcast had to forego 107,000 residential video customers in Q1 2019 as against 93,000 losses in the prior-year quarter. Charter, however, lost 145,000 video customers in Q1 2019, wider than the year-ago customer losses of 111,000.

The merger of DIRECTV with Dish Network

Amid intense competition in the streaming industry and continued decline in pay-TV subscribers, AT&T has decided to spin off its satellite-TV business to Dish Network. Last month, the cable companies planned a merger between AT&T’s DIRECTV unit and Dish Network, which would benefit both the companies.

The spin-off of AT&T’s DIRECTV satellite TV business would likely help the telecom company reduce its debt burden. Notably, AT&T is seeking to lower its huge debt load, which increased after its $85.4 billion acquisition of Time Warner. At the end of Q1 2019, AT&T’s long-term debt was $163.9 billion, while its short-term debt was $11.5 billion. AT&T’s net debt balance was $168.9 billion in Q1 2019.

AT&T can also use the proceeds on its upcoming streaming service HBO Max, which is expected to launch in the spring of 2020 at the cost of roughly $16 to $17 per month. The acquisition of AT&T’s DIRECTV unit could make Dish Network the largest US pay-TV service provider with about 29 million subscribers. The deal would also let the cable company lower its programming costs.

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