Time Warner Cable Loses Viacom: MTV, Nickelodeon, Comedy Central To Go Dark

LOS ANGELES — Millions of cable TV subscribers might see more than a dozen channels from MTV to Comedy Central go dark at a minute past midnight Wednesday if a dispute over carriage fees between Viacom Inc. and Time Warner Cable Inc. spills into the new year.

Time Warner, the nation's second-largest cable operator, proposed an increase in what it pays for Viacom's channels, but the offer was rejected as "a pittance," said Viacom spokeswoman Kelly McAndrew.

High-level phone talks continued Wednesday night.

The impasse, coming at the end of a three-year contract, threatened to blank out shows such as "SpongeBob SquarePants" and "The Colbert Report" to about 15.7 million subscribers to Time Warner Cable and Bright House Networks, an affiliate for which it negotiates programming deals.

Time Warner Cable serves 13.3 million people in New York state, the Carolinas, Ohio, Southern California and Texas; Bright House has 2.4 million customers in Michigan, Indiana, California, Alabama and Florida.

Time Warner Chief Executive Glenn Britt on Wednesday called Viacom's demand for a 12 percent increase in fees _ an extra $39 million on top of the estimated $300 million it pays Viacom annually _ extortion and outrageous given the recession. Viacom countered that the requested increase amounted to an extra $2.76 annually per subscriber.

"We sympathize with the fact that Viacom's advertising business is suffering and that their networks' ratings have largely been declining," Britt said in a statement. "However, we can't abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers."

In a public relations blitz, Viacom took out newspaper ads showing Nickelodeon's animated bilingual heroine "Dora the Explorer" crying and clinging to her monkey pal, Boots.

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"Why is Dora crying?" the ad asks. "Time Warner Cable is taking Dora off the air tonight!" The ad urged viewers to call Time Warner Cable and demand that their favorite shows remain on the air.

Viacom planned to run TV ads starting Thursday on local broadcast stations in 11 major markets including New York, Los Angeles and Dallas, blaming Time Warner Cable for the blackout.

It also launched ads on its networks Wednesday night declaring that "starting tonight, you will lose 19 channels from your TV" _ prompting an outcry from the American Cable Association, which said the messages also hit some 83 million subscribers "that have nothing to do with that mess."

Time Warner spokesman Alex Dudley said the advertising campaign was a sign that Viacom had been preparing for a damaging shutdown.

"They never had any intention of settling this or negotiating in good faith," Dudley said.

Viacom said Americans spend a fifth of their TV time watching Viacom shows but its fees make up less than 2.5 percent of the Time Warner cable bill.

McAndrew said that despite ranking high in the ratings, Viacom's cable networks' average daily license fee is 65 percent lower than that of networks run by The Walt Disney Co., News Corp.'s Fox, Time Warner Inc.'s Turner Broadcasting System and Discovery Communications Inc.

Analyst Michael Nathanson with Bernstein Research said Viacom's channels had been "underpriced relative to their peers." He expected a settlement relatively quickly.

"Both sides may not want to see if this battle results in mutually assured destruction, as Viacom loses ad dollars and Time Warner Cable loses subscribers," he wrote in a research note.

Public carriage fee disputes of this scale between a programmer and a cable operator are not that common, especially when there's a threat of a blackout, said Derek Baine, senior analyst at SNL Kagan in Monterey, Calif. Typically, both sides agree on contract extensions as they negotiate on terms, he said, and any blackouts don't last long because TV operators get calls from outraged customers.

One prominent carriage fee fight in recent years was in 2004, between Viacom and EchoStar, the former name of Dish Network Corp. Shows were dropped for two days.

In October, Time Warner Cable wrestled with LIN TV Corp., which operates local TV stations affiliated with NBC, CBS, Fox and CW. But this time, Time Warner Cable faces Viacom, the largest cable programmer, not a small independent with a handful of channels.

"It's a must have," Baine said. "That's probably why Viacom is playing hardball."

If Time Warner Cable and Viacom can't reach a deal or an extension, the channel blackout would occur after midnight in each time zone. The affected channels would be: Comedy Central, Logo, Palladia, MTV, MTV 2, MTV Hits, MTV Jams, MTV Tr3s, Nickelodeon, Noggin, Nick 2, Nicktoons, Spike, The N, TV Land, VH1, VH1 Classic, VH1 Soul and CMT: Pure Country.

Viacom shares rose 88 cents, or 4.5 percent, to close at $20.12 on Wednesday, while Time Warner Cable shares fell 31 cents, or 1.4 percent, to $21.45.

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AP Business Writer Deborah Yao in Philadelphia contributed to this report.

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On the Net:

Viacom ad urging viewers to complain:

http://tinyurl.com/78zgrk

Comments

[Infostream]

brrrrriiiinnnng barrrinnnnggg, WAKE UP, somebody at HuffPo has a heckuva hangover. this story is incorrect and 2 days out of date, they reached an agreement.

[BrooklynBookWorm]

For the record, Time-Warner Cable is still (1/2 evening) carrying the Viacom channels, at least in New York where I subscribe.

That said, I heartily endorse the notion of "a la carte" programming. I hate to spend $65 a month for 180-odd channels, some of which are very odd indeed and most of which I never, ever watch. The objection in the industry is that if only actual viewers paid for a given network, the smaller audience would have to pay much more per capita than they do now (as much as $2.00 instead of 20 cents), not simply as a matter of math (total cost divided among a much smaller number of subscribers), but because the smaller audience means lower ad revenues for the network in question. There's also the question of how a non-subscriber could sample a network she does not regularly watch. True enough, but there must be ways to deal with this without forcing me to pay for the Military Channel, the Prayer Channel, Fox Noise, and kids' shows that do not amuse my cat.

Back when there were only three channels, I recall reading more books and getting more sleep. Maybe fewer channels is not such a bad idea.

[JaneaneTheAcerbicGoblin]

I like the "a la carte" idea as well. Similar to satellite radio.

[kwkw]

The whole business is bull. As a viewer, I'd rather pay directly for the channels I want. Each channel can carry its own price. If I only want The Discovery Channel, History Channel, TvLand, and 4-5 others, I check off those boxes and they charge me accordingly, plus maybe a $10 flat rate or something. I currently don't have cable tv because it's a waste of money; I'd watch it maybe 2-4 hours a week, and I'm not paying $100 for that.
I'd rather watch reruns online.

[ENOS]

those shows suck, and are vile to the influence of American kids.

[digitalprophet]

I would normally be upset with Viacom for trying to squeeze more money, but as the numbers show they are sorely underpaid compared to similar(or even lesser) offerings.

I remember reading something about ESPN being the bane of cable companies and what really brought about bundling. ESPN charges the highest carriage fee across the board because they feel they are necessary to make any television package complete. They've gotten incredibly comfortable with the rates they are getting and other companies are starting to get a bit jealous, IMHO.

But yes, in a perfect world, paying for cable should mean no commercials. Think about all the other "services" that are out there that the very act of buying in gets rid of commercials(and that becomes a huge selling point). People talk about an internet 2.0, I want to see a television retooling(especially with the ambiguity of HD to laypeople).

[RJSquirrel]

deal as been reached. this one is now old news

[Principaldad]

Update: Multiple media outlets are reporting that Time Warner and Viacom have reached a settlement. Terms of the settlement are as yet undisclosed.

[fredamae]

Fischer Communications did the Same thing and we Lost access to ABC programming.

At a time like this They are Heartless to Increase costs to the consumer. I understand it has more to do with a Decrease in advertising dollars, so like all great corps, they will suck More money from Us!

[robin50]

Between commercials and the paid programming they all got a lot of gall to expect payment period. Wasn't there at one time a supposed plan that cable fees would do away with commercials? We see where that went.

[sempronia]

for goodness' sake! i live in austin, and we lost nbc during the election (that is, when tina fey was doing her sarah palin impression) while they were fighting with the local station. now we're losing comedy central? do i need a better reason to switch services? this is bull.

[LREKing]

And, in case anybody still cares, a deal has apparently been reached and TW will not lose the Viacom content.

[skippypicasso]

Let's not simply blame media consolidation on Republicans--the mega-conglomerate monopolies have so many pols on both sides in their pockets they're running out of pocket space. Don't forget who signed the Telecom Act of '96 continuing our slide toward the Ethics-Free Dreckland of the Media Overlords we've been on since Bedtime-for-Bonzo-boy hit DC in 1980.

[martymefurst]

The Telecom Act of 96 was signed by Bill Clinton, and the subsequent deregulation of radio made it possible for Clear Channel to go from a few dozen stations to hundreds.

[GayIthacan]

It's 1:01 in the East - and I still have all the channels. Not that I would miss much if they vanished.

I think it was all a bunch of garbage - pure publicity stunts by both sides to pique viewership.

[newleaf]

if paulson or cheney is related to these corporations somehow, they'll probably get a bailout.

[BkLyNY]

Its 12:14 and i still got those channels

[JaneaneTheAcerbicGoblin]

Yeah, me too. Comedy Central, MTV, TVLand, they're all running.