The Weather Channel, knocked off DirecTV in a dispute over subscriber fees, on Tuesday released research that it said showed that DirecTV could lose more than 1.6 million subscribers who would switch distributors to get the network back.
The Weather Chennel commissioned research company Ipsos, which contacted 1,000 DirecTV subscribers. When asked what they would do if The Weather Channel were no longer available on TV, 8% said they would switch providers and another 22% said they would strongly consider switching providers.
In most recent disputes between programmers and distributors, the programmer wins because its losses in sub fees and advertising revenue are short term, while subscriber losses by distributors result in long-term financial losses.
The study was conducted Jan. 12-15. All respondents were between 21 years old and 64 years old.
Weather Channel has been blacked out on DirecTV since Jan 14.
Other financial analysts have detailed the damage a prolonged dispute could have on Weather.
Moody’s Investors Services said the dispute with DirecTV has no immediate impact on the company’s debt ratings. But the credit rating agency warned that a permanent loss of carriage fees from DirecTV could have "severe operational and credit ramifications" for Weather.
Moody’s estimates that a sustained loss of distribution by DirecTV could lead to revenue declines in the mid-teens for Weather’s cable network business. “This would severely threaten the company's deleveraging prospects,” Moody’s said.
“Another concern which could impact [Weather’s credit] rating is the potential that the subscriber fees are reduced,” Moody’s said. “This could trigger some ‘most favored nations’ clauses in other large distributor carriage agreements, and set a precedent for other distributors to follow to reduce their affiliate fees.”
In a separate report, SNL Kagan said that if Weather agreed to lower its rate by 20% for DirecTV, the activation of most favored nation clauses, resulting in a loss of about $40 million per year.
Kagan says Weather could continue to provide the same service at the lower fee level, but its margins would suffer, dropping from 44.5% to 38.1% in 2014 and declining over time.
Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.
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