Nickelodeon ratings down 20% after DirecTV drops network

SpongeBob SquarePants is getting the life squeezed out of him.

Ratings have plummeted more than 20% at Nickelodeon, home of “SpongeBob SquarePants,” “iCarly” “Dora the Explorer” and other popular shows, in the week after satellite broadcaster DirecTV stopped carrying the kids’ channel.

Other Viacom Inc.-owned networks, including MTV, Comedy Central and VH1, have also seen their ratings fall since disappearing from the homes of about 20 million DirecTV subscribers.

The two companies have been arguing over terms for a new distribution deal. DirecTV has said the long-term agreement that Viacom is seeking is an increase in value of $1 billion over the previous contract. Viacom countered that the number is “significantly less than that.”

The battle has been particularly nasty. Viacom has been running ads in print, television and radio using its TV characters to encourage DirecTV consumers to find a new pay-TV provider. DirecTV has fired back that Viacom is trying to gouge its subscribers and that “moms and dads are already fed up with Viacom using SpongeBob and Dora to frighten their children.”

The situation may only get worse. A top Viacom executive said Wednesday that the company had stopped negotiating with DirecTV.

“I really don’t see any end in sight, truthfully,” said Denise Denson, Viacom’s executive vice president of content distribution. “Nothing about negotiating with them is productive.”

Whether that is a negotiating ploy is likely to become apparent in the days ahead. A spokesman for DirecTV said it had a deal to put the channels back on its service when Viacom pushed for carriage of its movie channel Epix at a cost of more than $500 million as part of the pact.

“We know our customers don’t want to pay such an extreme price for an extra channel.... We stand ready and willing to work with Viacom to get this done and, once again, ask Viacom to do the right thing and restore these channels to our customers immediately,” the DirecTV spokesman said.

Fights between programmers and distributors are nothing new, but usually agreements are reached without channels being dropped. Once that point of no return is crossed, however, negotiations can drag on as neither feels deadline pressure to reach an accord and both sides start to dig in their heels. In 2010, News Corp.’s Fox went off Cablevision in the New York City area for two weeks until a new deal was struck.

In the short term, it is Viacom that is absorbing more punches. Nickelodeon’s rivals have seen significant ratings gains in the days since DirecTV stopped carrying the channel.

Walt Disney Co.is benefiting the most from Nickelodeon’s woes. Not only has Disney Channel’s audience jumped 20%, DirecTV has also added Disney Jr., a relatively new network, to its service to help fill the void left by Nickelodeon. The numbers for Disney Jr. have been solid enough that DirecTV said it will continue to make it available to all of its subscribers even after it reaches a new accord with Viacom and brings back Nickelodeon.

For Nickelodeon, the loss of DirecTV couldn’t come at a worse time. The cable network has already seen its ratings fall sharply this year. A long, drawn-out fight with DirecTV may make it difficult for the channel to fully recover.

“The central question is: How much of that audience will come back when Nickelodeon returns?” said Sanford C. Bernstein analyst Todd Juenger. “Certainly a percentage of the kids will get hooked on Disney programming and stay with it.”

Other, smaller kids’ channels such as the Hub and Sprout are also picking off discarded Nickelodeon viewers. The Hub said its total audience was up more than 100% and among kids 6 to 11 it saw a gain of almost 80%. Sprout’s audience grew more than 60%.

“We’re definitely getting a spike from this,” Sprout President Sandy Wax said.

DirecTV could eventually face blow-back from the fight with Viacom as well. Although DirecTV spokesman Robert Mercer said the El Segundo company has lost only a few subscribers since the Viacom channels came off, that could change if no new deal is imminent.

“Disconnects should be a greater issue as the dispute drags on,” Greenfield said in a recent report. Although Viacom is “clearly in pain,” Greenfield noted that it will be easier for the programmer to recapture lost advertisers and viewers than for DirecTV to replace lost subscribers.

Viacom’s Denson said the New York company will start aggressively persuading other cable and satellite operators that carry its channels to use that to market against DirecTV.

Some rival distributors, including Cox Cable, have made a point of publicly siding with DirecTV in its battle with Viacom. But others are finding subtle ways to let consumers know there are other options. Satellite broadcaster Dish Network Corp. has ads on Facebook that include characters from popular Nickelodeon, MTV and Comedy Central programs. SomeComcast Corp.cable systems are running radio ads encouraging consumers to switch pay- TV providers.

“They are actively marketing behind the scenes, taking advantage of the situation,” Denson said. “Everyone is starting to play against DirecTV.”

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