Time Warner, Viacom prep for battle

Sides bicker as cable contract deadline nears

Viacom and Time Warner Cable are heading toward tonight’s midnight deadline for their contract talks with bayonets drawn. Both sides are accusing the other of making unreasonable demands that are roadblocks to a deal that would prevent Viacom’s MTV, Nickelodeon, Comedy Central and 16 other channels from going dark on Time Warner systems in New York, L.A. and other big markets as of Thursday.

Viacom took the long-simmering fight public late Tuesday by reaching out to reporters with details of the talks and the approaching deadline. On Wednesday, Viacom had full-page ads in the New York Times and Los Angeles Times featuring an image of Nickelodeon’s “Dora the Explorer” character under the headline “Why is Dora Crying?” The ad urged viewers to call Time Warner Cable with complaints.

TWC brass were clearly caught off guard late Tuesday by Viacom’s aggressive PR maneuver, which also included local TV and Internet vid spots warning viewers that hits ranging from “The Daily Show with Jon Stewart” to “SpongeBob SquarePants” would be MIA on Time Warner Cable systems unless the cable operator cuts a deal.

Time Warner Cable CEO Glenn Britt blasting Viacom in a lengthy statement Wednesday for “trying to extort another $39 million annually” from TWC’s 14.7 million cable subscribers. TWC reps emphasize that Viacom has refused to grant a temporary extension that would allow the channels to remain on TWC systems while the sides continue to negotiate.

“We sympathize with the fact that Viacom’s advertising business is suffering and that their networks’ ratings have largely been declining. However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers,” Britt said. “We hope Viacom won’t pull the MTV Networks from Time Warner Cable customers, and we’ll negotiate up to the last possible minute and beyond. But ultimately, it is Viacom’s decision. We implore them to join with us to reach a fair resolution or grant an extension, and we hope they won’t carry through with their threat to take their networks away from our customers tonight,” he said.

Viacom, meanwhile, slammed TWC refusing to budge in the negotiations process. Talks between the two media giants remain ongoing, but it’s understood that Viacom has been pushing for a meeting between Viacom CEO Philippe Dauman and TWC chief Britt, but TWC has so far resisted.

“Time Warner Cable’s continued rhetoric and posturing is disappointing and unproductive. We remain ready and willing to engage. It’s time for serious talk — before the viewers become the victims,” Viacom said in a statement Wednesday.

On Tuesday, Viacom said Tuesday it is seeking modest fee hikes that would amount to less than 25 cents per subscriber per month for a three-year carriage agreement covering 19 of its 20 cablers. (Viacom’s BET is covered by a separate contract.) Viacom emphasized that it has recently cut renewal deals with numerous other cable operators, but months of talks with TWC brass have led to an impasse between the media giants. Viacom said the deal it’s seeking amounts to a 12% increase in fees for the channels, or about $2.76 per subscriber.

Viacom was also quick to note that TWC is already implementing a $3 rate increase as of Thursday to subscribers in L.A., Orange County, Gotham and a few other markets.

Sources familiar with the situation noted that Viacom’s MTV Networks wing has been pressing hard for higher subscriber fees in its recent renewal negotiations with cable operators, in part because in past years Viacom has been willing to horse trade carriage for distribution commitments for new channels. As a result, the fees cabler operators pay for Viacom- channels tend to be significantly lower than the coin paid to comparable nets owned by Disney, News Corp. and other media congloms.

To support that claim, Viacom sent out a report issued Wednesday by Bernstein Research senior analyst Michael Nathanson who estimated that TWC spends about $300 million annually in subscriber fees for Viacom nets. That amounts of 2.8% of TWC’s revenue from cable programming services.

“Viacom’s cable networks are materially under-priced relative to their peers, which we believe represents an opportunity for Viacom in the future,” Nathanson wrote.

Cleary, for Viacom, the future is now. With the company facing a deep slump in advertising revenue, like every other media conglom, Viacom topper Dauman is intent on boosting subscription revenue coin from one of its key distribs.

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