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Time Warner Cable says 'Disney is the problem' [Updated]

August 27, 2010 |  2:38 pm

With less than a week to go before their programming contract expires, the rhetoric between Walt Disney Co. and Time Warner Cable is starting to heat up.

At issue are fees that Time Warner, the nation's second-largest cable operator and the dominant pay-TV company in Los Angeles, pays Disney to carry its various networks and channels, including KABC-TV here as well as ESPN, ABC Family and Disney Channel.

Battles between programmers and distributors are becoming quite common, and usually agreements are reached without consumers losing any channels. Fox and Time Warner had a heated fight that was resolved without any signals being pulled, even though a new deal wasn't struck until after the old contract had expired.

However, Disney hasn't been afraid to see its channels go away. Earlier this year, its channels were pulled from Cablevision Systems Corp. in a fee dispute that left viewers without the first half-hour of the network's telecast of the Oscars until a new pact was finalized. Satellite broadcaster Dish Network also stopped carrying some Disney channels earlier this summer.

[Updated at 3:30 p.m.: Disney countered that Dish was not authorized to carry the dropped channels in the first place and pointed to a favorable ruling it received in a legal battle against the satellite broadcaster. Disney also said it had been extending its deal with Cablevision for two years before finally pulling its signal.]

That Disney doesn't mind playing hardball isn't lost on Time Warner.

"If they’ve done it with those two and they’re threatening to do it to us, there’s a definite pattern emerging," executive Jeff Simmermon said in a blog post on the Time Warner website. Disney has been running advertisements alerting consumers of the potential loss of its channels and offering a website that will detail what alternative providers are available.

"Switching providers isn’t going to get rid of a problem with Disney when Disney is the problem," Simmermon wrote.

An ABC spokesman said Disney "remains committed to negotiating a fair agreement that recognizes the value of our channels."

In a report issued Friday, Janney Montgomery Scott analyst Tony Wible said he thinks Disney can get between 40 cents and 60 cents per subscriber for its local ABC television stations.

In the past, broadcasters such as Disney's ABC leveraged carriage of their local TV stations to launch new cable networks: Cable operators didn't want to pay to carry local television stations because said stations are available to consumers for free already. Instead, cable and satellite distributors agreed to carry new cable networks and pay for those so they could say that they technically weren't paying for a broadcast station. That's how Disney launched ESPN2 and Fox launched FX.

Now, though, no one is really clamoring for new cable channels, and broadcasters are desperate for a second revenue stream. Cable operators already charge consumers a fee to get local signals, so broadcasters figure they should be compensated. 

Disney already owns some of the most expensive cable networks around including ESPN, which costs distributors more than $4 per subscriber, according to Wible. The Disney Channel costs almost $1 per subscriber, and ESPN2 costs almost 60 cents per subscriber.

While it's likely that neither side wants to see the channels come off, it might help if both could agree on when exactly the deal expires. Time Warner Cable indicated to Company Town that the agreement ends at 11:59 p.m. on Sept. 1, and Disney said it is up at 12:01 a.m. on Sept. 2. How about making it easier on all us reporters stuck covering this and having the next agreement expire in the middle of the afternoon?

-- Joe Flint

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