Viacom threatens to yank programming off Time Warner Cable systems
"Spongebob Squarepants," "Dora the Explorer" and Jon Stewart soon might be pulled off Time Warner Cable systems in Los Angeles and around the country if the cable operator and Viacom Inc. cannot reach a new contract before midnight tomorrow. The move could knock Viacom's cable channels, which include Nickelodeon, MTV, VH1 and Comedy Central off nearly 2 million households in Los Angeles.
"We've been attempting to negotiate in good faith but they seem to taken it to the brink. Unfortunately, we are now at an impasse," said Philippe Dauman, chief executive of Viacom Inc. "It's unfortunate for all of our viewers should they lose the ability to watch our programming."
Viacom's license agreement with Time Warner Cable, which serves 12.3 million homes in the U.S., is set to expire at midnight Wednesday. If no deal is reached, Time Warner must take the Viacom channels off its cable systems and use alternative programming instead.
"Advertising revenue stinks so they are looking to stick our customers for the difference," said Alex Dudley, Time Warner Cable spokesman. "They are holding our customers hostage for a bunch of networks with sagging ratings and only one or two good channels. We have to hold the line for our customers."
Viacom said that it is asking for an increase of about 25 cents per month for the package of channels, which comes to about $3 a year per customer. Time Warner said that could trigger cable networks to demand higher fees as well, which ultimately could add as much $30 a year to a subscribers' bill.
This wouldn't be the first time that a cable channel has gone dark. It is not unusual for cable networks and cable system operators to pull or block programming during difficult negotiations. In 2004, for example, Viacom's cable channels disappeared from EchoStar's Dish Network for two days while both sides quarelled over the terms of a new contract. Earlier, Time Warner blocked ABC from its cable systems in New York during a breakdown in contract negotiations with parent company Disney involving carriage of its cable networks such as the Disney Channel and Toon Disney.
But the high-stakes dispute could prove to be different this time around because much of Viacom's programming, including Comedy Central's John Stewart and Steven Colbert, is now available free online. Moreover, Viacom no longer owns CBS, so it can't threaten to pull the network off cable systems on the eve of NFL playoffs, as leverage in negotiations. The hard-nosed tactics also come at a time when Viacom's stock is trading at historic lows and the company's controlling shareholder, Sumner Redstone, is facing hard choices in refinacing the debt of his holding company, National Amusements Inc.
-- Meg James
Photos: Left: Philippe Dauman, chief executive, Viacom Inc. (Chip Somodevilla/Getty Images); Right: Glenn Britt, chief executive, Time Warner Cable (Seth Wenig/AP)