Millions of DirecTV customers are facing a Fourth of July miracle that seems highly unlikely. They have lost access to programming from Nexstar-owned local stations and cable network NewsNation. Instead of a quick resolution, it seems that a prolonged distribution battle will unfold during a summer programming lull. This comes at a time of great uncertainty for TV stakeholders, with the ongoing WGA strike and the potential walkout by SAG-AFTRA. The dispute has resulted in about 159 ABC, CBS, Fox, NBC, and CW affiliates going dark on DirecTV. Major markets like L.A., Chicago, Philadelphia, San Francisco, and Denver are all affected, including popular stations like KTLA and WGN. The exact number of affected subscribers is disputed, with Nexstar claiming it’s over 10 million and DirecTV stating it’s significantly lower.
In the midst of this standoff, there is little positive momentum in the discussions between the parties. With the sports calendar and broadcast primetime slate at a low point, the standoff is expected to last for a while. The lack of must-see content further diminishes the urgency for a resolution. Adding to the complexity is the ongoing WGA strike, which has already disrupted programming and could worsen if SAG-AFTRA members decide to walk out. Nexstar argues that its contract with DirecTV has become obsolete and that the distributor can continue to increase prices for customers while paying outdated rates for programming. Nexstar claims to have negotiated tirelessly and in good faith since May, offering DirecTV a chance to extend the current contract until October 31, but the offer was rejected.
Rob Thun, chief content officer of DirecTV, counters Nexstar’s claims, stating that Nexstar has a history of forcing programming outages to raise prices. Thun, however, vows to continue working with Nexstar to reach an agreement. Meanwhile, the companies are engaged in another battle. DirecTV has filed a lawsuit and FCC complaint against Nexstar, objecting to the deployment of “sidecar” deals that it believes circumvent federal ownership limits. Nexstar maintains that these deals are in compliance with FCC rules and looks forward to prevailing in court.
Carriage battles have been common in the TV industry for decades, but they have taken on a more significant meaning in the current era of decline. Cord-cutting has accelerated, with several million homes leaving the pay-TV bundle each year. The number of U.S. households with a subscription to linear pay-TV is now fewer than those without one. Analysts believe this trend is irreversible and that the media industry is entering a sunset phase. DirecTV, which was spun off from AT&T and is now 30% owned by private equity firm TPG, has lost about 15% of its subscriber base in the past three years.
In this shrinking pay-TV landscape, the fights over carriage terms have become more extreme. Dish Network and Fubo TV have walked away from regional sports networks and other networks, leaving a swiss-cheese-like lineup on the top platforms. The decline in overall subscribers makes individual carriage deals even more crucial. Programmers are expecting to push for rate increases despite declining ratings. Nexstar, for example, acquired a 75% stake in the CW to increase its distribution heft and secure higher fees.
Despite the challenges, Nexstar remains optimistic about the long-term outlook for distribution revenue. The company’s balance sheet may have been affected by costly skirmishes with operators, but it still sees a positive future. While subscriber attrition is projected, Nexstar believes it is not at a precipice or inflection point.
