Media giants reach a "handshake deal," staving off the threatened blackout of 19 cable channels.
STAFF AND WIRE REPORTS | Posted: Thursday, January 1, 2009 12:00 am
In an 11th-hour agreement, Time Warner Cable said it has reached a deal with Viacom Inc. that would avoid a threatened blackout of 19 cable channels in a spat between the two media giants over how much the cable company pays to carry channels such as MTV and Comedy Central.
Time Warner, the nation’s second-largest cable operator, had proposed an increase in what it pays for Viacom’s channels, but the offer initially was rejected as “a pittance,’’ said Viacom spokeswoman Kelly McAndrew.
Blackouts of shows such as “SpongeBob SquarePants’’ and “The Colbert Report’’ loomed for Time Warner’s 13.3 million cable subscribers. Time Warner serves 110,000 subscribers in Lincoln and Southeast Nebraska.
Shortly after agreeing to extend a midnight deadline by an hour, Time Warner Cable spokesman Alex Dudley said the sides agreed on a new contract.
Details of the deal were not immediately available.
John Peterson of Lincoln, a father of four boys ages 3 to 11 who watch “SpongeBob SquarePants” on Nickelodeon, wasn’t happy with Viacom’s threat to pull several of its channels from the Time Warner Cable system.
He called Time Warner and Viacom on Wednesday to complain, only to have both companies tell him to call the other one.
“I found it very frustrating,” he said. “These companies are playing games with their customers. That’s what got me upset.”
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. “However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers.’’
Viacom had planned to run TV ads starting today on local broadcast stations blaming Time Warner Cable for any blackout of channels. Viacom began putting Time Warner’s toll-free telephone number Tuesday night on a crawl on its networks, asking subscribers to demand the cable company keep Viacom’s channels.
Dudley said the advertising campaign was a sign Viacom had been preparing for a damaging shutdown.
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 the 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.
But this time, Time Warner Cable faced Viacom, the largest cable programmer.
“It’s a must-have,’’ Baine said. “That’s probably why Viacom is playing hardball.’’
The channels that would have been affected in Nebraska are Nickelodeon, MTV, VH1, Noggin, TV Land, Comedy Central and Spike on the basic cable tier (Channels 2-80) and LOGO, Nicktoons, The N, MTV2 and VH1 Classic on the digital tier.
Programming from those networks on Time Warner’s on-demand channels also would have be affected.
Viacom networks CMT and BET are part of a different carriage contract, according to local Time Warner spokeswoman Ann Shrewsbury.
“We understand (our customers’) concerns,” Shrewsbury said earlier Wednesday. “We’re going to continue to negotiate aggressively on their behalf for fair and reasonable rates.”
Shrewsbury said subscribers jammed phone lines nationwide on Wednesday. Locally, many more worried customers journeyed to Time Warner’s offices for answers.
One of those was Lincoln’s Deena Saddler, a mother of three children ages 2 to 10. She said her children watch Nickelodeon and Noggin. She’s a regular MTV and VH1 viewer.
“Really, for me, by not having those channels, there’s no point of me having cable,” she said. “I’m really hoping (the negotiations) don’t take long.”
Shrewsbury said Wednesday night that Time Warner was prepared to offer alternative programming should a blackout occur, but after receiving news of a “handshake deal” with Viacom, she expressed her relief that negotiations apparently were over.
“We appreciate our customers’ patience and understanding,” she said.
Journal Star reporter Jeff Korbelik contributed to this report.