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Conflict between DirecTV and Viacom leads to blackout

An impasse in negotiations over Viacom's distribution deal with DirecTV has led to a service blackout for DirecTV customers this week. Viacom's channels have been taken off the air in lieu of a renewed contract with the satellite company. The stalemate has lasted for over a week, making it one of the longest and most impactful blackouts in the industry, affecting about 20 million subscribers.

The contract dispute is over an increased rate for DirecTV to carry Viacom's channels, with Viacom asking for an additional $1 billion in order to renew the distribution agreement.

While the distribution agreement between these two companies is on a much larger scale than contracts for many Fairfax businesses, the same issues may arise and can result in loss of services for customers and harm to both businesses in the long term.

In this case, the blackout has resulted in many of Viacom's loyal viewers turning to other channels, which has the potential to hurt their revenue in the long term if they lose any of these viewers permanently.

Ongoing disputes this like can also be harmful to the reputation of businesses within their communities. In this case, competing press releases have been laying blame on the other party for not wanting to negotiate a deal, which may end up hurting each of their reputations in the future.

At the same time, these are two very large and powerful companies with a lot of power in the marketplace, so the contentious conduct could also be intended to indicate strength to competitors.

Source: Reuters, "Viacom, DirecTV talks break down, blackout continues," July 19, 2012.

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