DIRECTV failed to reach a deal with local broadcast station owner Tegna, resulting in 64 local ABC, CBS, FOX, and NBC channels going dark for its core satellite offering, as well as streaming services AT&T TV, and DIRECTV STREAM.
Tegna, whose stations cover 51 markets, began warning viewers this weekend that it may pull its channels from DIRECTV, and is now following through with that threat after the two sides failed to come to an agreement by Thursday’s 8 p.m. ET deadline, which marked the expiration of its current deal. Things didn’t look good when DIRECTV began emailing select customers earlier Thursday that may lose their service, and offering them a $25 Visa gift card.
This marks the second time this year that DIRECTV and a major local station owner couldn’t reach a deal this year, with the pay-TV provider tussling with Nexstar over their own distribution agreement. That dispute resulted in a blackout that lasted two and a half months through the summer. DIRECTV had warned that the rising distribution costs would eventually be passed on to consumers. A few weeks after DIRECTV reached its deal with Nexstar, the pay TV provider hiked its prices across the board by an average of $5 a month.
It’s unclear how long the blackout will last, but Rob Thun, chief content officer for DIRECTV, told Cord Cutters News that the two sides were “extremely far apart.”
Tegna is seeking annual double-digit rate increases, representing the highest rate request ever, Thun said. Agreeing to the proposal would just push more customers away.
“If we continue this pattern…we’re going to drive this business off a cliff,” he added.
Tegna, meanwhile, blamed DIRECTV for the breakdown.
“Despite months of effort, DIRECTV has refused to reach a fair, market-based agreement with TEGNA,” the company said. “As a result, DIRECTV and AT&T U-Verse customers will lose access to NFL and college football conference championship games, as well as some of the most popular national network programming and top-rated local news. We urge DIRECTV to continue to negotiate with us until a deal is reached that restores our stations to their customers.”
In the face of rising distribution costs, DIRECTV offered something new: a proposal to offer local stations a la carte, and to let Tegna set whatever price it wanted. Rather than bundle local channels in its packages, DIRECTV would let its subscribers decide if they want to pay for the local stations, the company said.
Tegna rejected the idea, saying it would require customers pay another fee for those channels.
“We’re committed to reaching an agreement that continues to ensure all of DIRECTV’s subscribers in our communities have access to the local and national news, sports and entertainment our stations offer, while providing our stations with the fair compensation they need to continue their significant investments in the content viewers value,” Tegna said in a statement. “In contrast, DIRECTV’s proposal to instead require its customers to pay yet another standalone fee for our local stations – unlike all other broadcast stations – disserves subscribers and is not productive.”
It is a radical concept, especially considering local channels are typically bundled into pay-TV packages, or offered free through an over-the-air antenna. Consumers aren’t used to pay for local stations as a premium add-on. But the proposal reflects the growing burden on pay-TV providers that need to pay higher rates to carry those channels.
While Thun said the a la carte proposal isn’t a dealbreaker, he said the company wouldn’t accept the “preposterous rates.”
“We need to consider whether we need local broadcast in our lineup,” he added.
DIRECTV’s proposal represents a shake-up of the typical distribution agreement, similar to how Charter Communications’s Spectrum and Disney structured their own new kind of deal. The two sides ended a two week-long blackout by agreeing to include Disney+ and the future ESPN streaming service for some Spectrum customers. Disney also agreed to drop a few of its lower rated cable channels to make room for the higher fees for ESPN.
Cord Cutters News will have full coverage of the contract fight between DIRECTV and Tegna.
This is breaking news, so check back here for updates.