Time Warner, Viacom reach deal to keep cable channels
Posted December 30, 2008
Updated March 9, 2009
Raleigh, N.C. — Time Warner Cable Inc. says it has reached a deal with Viacom Inc. on carriage fees, avoiding a blackout of 19 cable channels, including MTV and Comedy Central.
The two sides, citing disagreement over fee hikes, had threatened a damaging blackout at midnight that would have cut off shows like "SpongeBob SquarePants" and "The Colbert Report" to about 15.7 million subscribers.
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 weren't disclosed.
"We are pleased that our customers will continue to be able to watch the programming they enjoy on MTV Networks. We are sorry they had to endure a day of public disagreement as we worked through this negotiation," Time Warner Cable President and Chief Executive Glenn Britt said in a statement.
"We've been partners with Time Warner Cable for a long time, and we're happy to be renewing that partnership for the benefit of their customers and our loyal viewers," Viacom President and Chief Executive Philippe Dauman said in a statement. "It's gratifying that we could reach an agreement that benefits not only our audiences but that is also in the best interest of both of our companies."
Time Warner Cable is the nation's second-largest cable operator primarily serves customers in New York state, the Carolinas, Ohio, Southern California and Texas.
The channels that would have been affected were Comedy Central, CMT: Pure Country, Logo, Palladia, MTV, MTV 2, MTV Hits, MTV Jams, MTV Tr3s, Nickelodeon, Noggin, Nick 2, Nicktoons, Spike, The N, TV Land, VH1, VH1 Classic and VH1 Soul.
"We watch Noggin every day in this house, and I don't know what I'd do without it," Raleigh resident Melissa Thornton said.
Pop-up alerts on "The Colbert Report" and "The Daily Show" Web sites Wednesday morning informed fans that Time Warner Cable customers could soon lose Comedy Central shows and urged them to call the cable company and protest the change.
Viacom also took out a full-page advertisement in Wednesday's edition of The News & Observer newspaper in Raleigh, asking customers to push Time Warner to keep the channels on the air.
Viacom had asked for fee increases of between 22 percent and 36 percent per channel, an amount that could increase customers' cable bills, said Melissa Buscher, a spokeswoman for Time Warner Cable in Raleigh.
"We've got to draw the line on an agreement that's fair to customers," Buscher said. "If every programmer was to demand millions and millions of dollars more, cable bills would keep going up. That's why we're trying to reach an agreement that is fair for our customers and for our company."
On Wednesday, Viacom spokeswoman Kelly McAndrew said the requested increase was in the very low double-digit percentage range.
"The issue is that they have asked for an exorbitant increase in their carriage fees and their network ratings are sagging," she said. "Basically, we're trying to hold the line for our customer."
Viacom said in a statement that the increases would cost an extra 23 cents a month per subscriber – which works out to $35.9 million more overall. It said that 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.
"The move by Time Warner Cable is another example of overreaching for profit at the expense of its viewers," the statement said. "The renewal we are seeking is reasonable and modest relative to the profits Time Warner Cable enjoys from our networks."
"We hope that customers understand that we don't want to pull these networks off the air," Buscher said.
Thornton said she didn't understand why the two giant companies were bickering over a seemingly small amount.
"What are they thinking? It's over a couple of pennies that they're fighting, you know? Get over it," she said.
She said she called Time Warner Cable twice and also e-mailed the company, pleading that the 19 channels not go away.
"I'll be calling Time Warner Cable (if the channels are dropped) and saying, 'You know, I'd like to cancel my service,'" she said.
Thornton and other subscribers said Time Warner's recent announcement that cable rates will increase next month also irritated them because they might be paying more for fewer channels.
Part of the disagreement is that most of the popular shows are rerun on Web sites where Viacom collects advertising revenue that it does not share with Time Warner, Dudley said.
"We don't think that's fair," he said. "They're trying to have their cake and eat it too online, where anybody can get it for free."
Viacom has staked much of its revenue-growth prospects on its ability to extract higher carriage rates out of its cable and satellite affiliates despite an ad slowdown and weak ratings.