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

[swiss-ski]

Investigate Comcast. The worst cable company on the planet!

[sheikwil4]

my mother lives in Florida and she always complain about comcast, she has them as her internet provider because that's about all they can get in their area, but she switched to a satelite company for her TV an I love it when I go home.

[Cos1]

They have a ticker tape going across these channels all day giving notice that these programs will end. Seems they should have worked on improving some of the shows on these channels before trying to get more money for them. MTV use to be about music, now it's crap. Good riddance.

[kassandrasduplex]

The TV went dark...And then there was a measurable increase in Time Warner subscriber's intelligence quotient.

[macbabe]

Invest in DTV, made .55 per share already today!

[carolinafan]

Since we are losing 19 channels that would mean our cable bill should be decreased ...correct­? We should not continue to pay for services we no longer receive...­?!!!!

[texasrodeoqueen]

Already canceled cable

[zg1968]

Hopefully not over this issue. Viacom needs Time Warner as much as the other way around....

[creekpaddler]

And really, where I live, satellite dishes and DTV just are not an option. There are too many trees, leaves in the summer, hills and cliffs that surround my house. It would just not work as well. Also, TWC just had a deal that you could lock in a 10% lower rate for I believe three years. How many of you all took advantage of that here in NY? I saw the ad and went for it so I am locked in at 107.96, that includes my internet, my expanded basic cable and a digital box on one TV, for the next few years. I had Verizon internet service but because the lines here where I live are so old, my high speed modem operated at a crawl. I only use Verizon for a land line. I don't even use them for long distance preferring Skpe and Pioneer Long Distance. Would I really miss cable? Yeah, for some things. There are certain programs that I would really miss a lot. But the bulk of the programming is garbage. Get rid of all the infomercial stations and the religious stations and home shopping networks and the million and one nonsense stations. Let us just "buy" the stations we want, a la carte. I just block out the stations that I consider garbage anyway. If an advertiser thinks that I am going to spend my time watching the crap on some of these stations, they are very much mistaken.

[Kalitipo]

CABLE PRICES GOES UP EVERYDAY,AND THEY SHOW IS GARBAGE,,GARDEN CHANNEL,HO­MESHOPPING­,CATCH AND RELEASE FISHING( IWISH IT IS CATFISH).H­ANNITY.HOT­DOG EATING CONTEST.YA­NKEE O GRAPHY

[MyLowell]

yankee-ogr­aphy..lol

[MyLowell]

i live in ny. i have cabelvision - i should get the package where we have cable, phone, and internet through them but i have to call to see what it will cost after the "promotional" period of a year ends (it's like $29.95 or $39.95 each for the first year). at first the promotion was only for new subscribers, but they extended it to current cablevision customers as well.

all of their advertisements and online info. doesn't tell you how much it will be after the first year. go figure.

[carolinafan]

Have to agree with some of the others. Both of these companies are going to drive themselves into a hole. People now are cutting back due to job losses, pay cuts, etc...whil­e this folks keep getting greedier..­.trying to increase their profits and fill there pockets with money folks can not even afford anymore. We have become spoiled and accustomed to having all these channels but hey I grew up in a time when our house never got more than three or four channels..­.Guess what...the­re was more to watch then than there is now with all these "extra channels" (which most suck anyway!!).­..I have to agree with the other person...m­aybe we should just go buy some rabbit ears or an antenna and get a converter box and just watch our local stations..­..could save us almost 150.00 a month...an­d then guess who gets to suffer...i­t is apparent than neither of these companies are interested in the consumer base!!!!!

[MyLowell]

considering that having all of these channels would only cost a customers $2.76 more a year, i'm sure they are willing to pay for it.

cable is an expensive rip-off period.

[OKF]

I hate Network television, and most basic cable channels. I wish I could subscribe to ONLY HBO, Showtime, Cinemax, STARZ, etc. Those are really the only channels I watch. The 2 network TV series I care about I can watch online anyway, and besides...­. everything that isn't named CSI-Something get's cancelled withing 1-2 seasons. Forget it. Death to TV. I need to read more anyway.

[rockyb26]

i thankfully have direct tv. time warner is the worst cable company ever. they've been robbing customers blind for a while now.

[pizzmoe]

touche

[creekpaddler]

You know what, who cares? I don't watch those channels much anyway. I have no children in the house or teens. I have no interest in Spike TV. To tell you the truth, I find most of the channels on cable to be totally uninteresting and basically just watch PBS, Thursday night NBC and ABC, and an occasional HBO movie or series. Like others have said, I can always watch Jon Stewart on the internet. My mom will not be able to watch Comedy Central for Jon Stewart but I don't think it will be a big loss to her. To be truthful, I have been really thinking of not having more than the absolute basic cable anyway. Almost everything I want to see I can see on Netflix or the internet anyway. No big loss.

[sej100]

Have to agree with the poster that MTV is going down anyway.
I have no problem losing MTV

[sej100]

Both companies are guilty of greed.
We are in a depression.
People are losing jobs, their homes, their savings.
People cannot continue with either company if rates continue to rise.

Personally, Im thinking of can celling premium channels

Continue to raise prices and all that will result is a smaller customer base

[MyLowell]

"Continue to raise prices and all that will result is a smaller customer base."

which will in turn result in even higher prices and an even smaller and smaller customer base and then higher and higher prices.

[zg1968]

Are you kidding - with all of the people on this board crying like stuck pigs because they might not get MTV for a day...no subscribers of scale are going anywhere over this.

Subscribers gave up all their leverage when they started treating cable TV like a utility that they can't live without.

[MSaxe]

Both of these companies are being greedy and self-centered during a time of belt-tightening across the country. It’s just another example of the executives in the boardrooms drinking their own brand of kool-aid. I wish they would go ahead and broadcast these people committing hari-kari. It would be a very highly rated show.

Great time to switch to satellite.

[momofteens]

YOUR KIDDING ME RIGHT!!!! I know everyone is having hard times. I'm in the same boat, especially being a mom of teens. And no I don't like paying $150 plus for my timewarner services,which I think is an unreasonable amount of money each month. But come on only $2.67 increase a YEAR. I'LL TAKE IT, if it means I get to keep the channels my family loves to watch.