As Charter Communications and Viacom continue to negotiate their carriage renewal agreement – the programmer granted the operator a short extension Sunday night – Telsey Advisory Group media analyst Tom Eagan warned that any price cuts could trigger similar arrangements with other distributors.

“By early this week, we expect the contract will be renewed,” Eagan wrote in a note to clients Monday (Oct. 16). “But, we also expect it will be renewed at lower rates and for fewer channels. We expect this deal will translate to lower domestic affiliate revenue and a lower value for Viacom equity holders.”

Viacom’s carriage deal with Charter, representing about 16.6 million customers across the country, including New York and Los Angeles, was set to expire on Oct. 15 at 7 p.m. While there was much chest thumping leading up to the deadline on both sides, Viacom issued a statement Sunday night that it had granted a short extension to the deal, which would keep its programming on Charter systems while it worked toward a conclusion.

But whatever agreement is eventually worked out, it will likely be for a lower affiliate fee than what Viacom had been receiving in the past – Viacom has said in statements that it offered lower rates to Charter but was rejected – and possibly for fewer networks. Viacom has about two dozen channels, but in February said it would focus on six core networks – MTV, BET, Nickelodeon, Nick Jr., Comedy Central and Spike TV (to be renamed Paramount Network).

In the note to clients, Eagan wrote that he expects Viacom’s new Charter rate to be about 15% below what the MSO had paid in the past and for fewer channels. At the lower rate and for just six channels, Charter would see the affiliate fees it pays Viacom reduced by about 24%, Eagan added.

But Charter is the third largest multichannel video programming distributor in the country – behind AT&T-DirecTV and Comcast, which likely have MFNs that guarantee other smaller providers don’t have better deals.

In his note Eagan estimated that Comcast is likely paying about 3% less than Charter, and coupled with a reduction in the number of networks they would have to carry, could translate to 14% less affiliate fees paid by Comcast. Also assuming that AT&T-DirecTV is paying about the same as the new Charter rate, having to carry fewer networks would translate into an 11% reduction in their affiliate fees.   

Viacom stock took a beating early last week – it reached a seven year low on Oct. 9 after Citigroup media analyst Jason Bazinet slapped a “sell” rating on shares and speculated that Charter would drop one or all of the Viacom networks. The stock has since begun a climb back – it was up 2% (54 cents each) to $26.54 per share in early trading Monday. But Eagan warned the lower affiliate fees could also result in a $2.10 per share reduction in Viacom’s overall valuation.

Small and midsized cable operators have banded together with independent programmers to tell the FCC that reining in most favored nation (MFN) clauses and alternative distribution method (ADM) clauses is all well and good, but that it should tackle program bundling first in its effort to promote access to independent and diverse content. 

That came in a filing on the FCC's Notice of Proposed Rulemaking stemming from its program diversity inquiry.

A politically divided FCC back in September voted to propose prohibiting unconditional MFNs clauses and "unreasonable" ADMs.

Joining with ACA in the filing were independent programmers MAVTV Motorsports Networks, One America News Network and AWE, and RIDE TV.

They said that while they were generally supportive of the MFN and ADM restrictions, focusing on those rather than channel bundling was like trying to put out a four alarm fire with a cup of water.

They said that while those are a problem, in many cases they can't get deals, good or bad, because smaller operators don't have the money or bandwidth after having to strike bundled deals for channels they don't want forced on them by larger programmers with must-have programing that they tie to other "little-watched and overpriced content."

As to the MFNs and ADMs, the FCC has proposed prohibiting all MVPDs from entering into unconditional MFNs with independent programmers. they point out. Instead, they want the prohibition to all to large MVPDs with any programmer, while allowing small MVPDs to enter into them. They also want the FCC to look into unconditional MFN's in retrans deals, saying that such clauses require them to carry multicast channels they don't want in order to get ones they do.

It is unclear whether the FCC under new management will take action on the NPRM.

The FCC has yet to vote on a final order, and in the meantime a new sheriff has arrived.

The two commissioners who dissented from that decision are now in the majority, with senior Republican Ajit Pai having been tapped by President Donald Trump as the new chair.