Viacom, Time Warner Cable Remain Deadlocked

With a midnight deadline looming, Viacom and Time Warner Cable had not resolved their carriage dispute as of 5 p.m. ET Wednesday.

Viacom is threatening to yank the 19 MTV Networks channels from the cable operator's 13.3 million subscribers at 12:01 a.m. on New Year's Day, after Time Warner Cable rejected Viacom's per-subscriber fee hikes -- which the MSO says would tack on an extra $39 million to the hundreds of millions it already pays the media giant. 

MTVN spokesman Mark Jafar said the companies are "definitely engaged" in discussions at this point but said there had been no resolution as of 5 p.m. Time Warner Cable vice president of public relations Alex Dudley confirmed that talks are ongoing.

The standoff between the two corporations also threatens to knock the MTVN services off the systems of Bright House Networks, which has a deal with Time Warner Cable that lets it take advantage of the bigger MSO's carriage agreements. Bright House has about 2.3 million basic video subscribers.

Viacom said it has asked Time Warner Cable for an increase of 23 cents per month per subscriber, an increase of 12%, and accused the cable operator of "overreaching for profit at the expense of its viewers." That indicates that Time Warner Cable currently pays around $1.92 per subscriber per month for carriage of the 19 MTVN channels.

"Time Warner Cable's continued rhetoric and posturing is disappointing and unproductive," Viacom said in a statement Wednesday afternoon. "We have made it clear that we welcome a credible and meaningful discussion that respects our viewers and the value our programming brings to Time Warner Cable. We remain ready and willing to engage."

Time Warner Cable president Glenn Britt characterized Viacom's demands as tantamount to extortion and said the MSO has made several concessions to try to reach "a fair and reasonable deal." 

"We sympathize with the fact that Viacom’s advertising business is suffering and that their networks’ ratings have largely been declining," Britt said in a statement Wednesday. "However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers." 

Time Warner Cable has more than 13 million video customers in markets that include New York City, Los Angeles, Dallas and northeast Ohio.

If the companies fail to reach an agreement by midnight Wednesday, MTVN's Nickelodeon, Comedy Central, MTV, Noggin, TV Land and other services will potentially be yanked off Time Warner and Bright House systems.

Viacom ran scrolling text along the bottom of its channels Wednesday -- which aired nationwide -- urging Time Warner Cable and Bright House customers to call their cable providers and complain about the impending loss of the networks. The media company also ran a 30-second spot with the same message (click here to watch it). 

"Throughout the country, we have negotiated equitable license agreement renewals, or are in the final stages of renewals, with virtually every cable and satellite carrier," Viacom said in its statement Tuesday. "Nevertheless, Time Warner Cable has dismissed our efforts at a fair compromise and has effectively chosen to deny its customers some of the most popular TV shows on the air."

The American Cable Association, which represents about 1,100 small and midsize cable systems, decried Viacom's screen crawl because the message was delivered to more than 82 million subscribers who aren't affected.

"Viacom has shown reprehensible judgment today while engaging in what amounts to a national misinformation campaign against thousands of cable operators and millions of subscribers," Steve Friedman, ACA chairman and chief operating officer of Wave Broadband, said in a statement.

Viacom claimed that U.S. viewers spend more than 20% of their TV viewing time watching its programming, while its carriage fees amount to less than 2.5% of what Time Warner Cable generates from its average customer. 

Britt countered that Viacom’s MTV Networks services are just a few of the hundreds of channels the MSO carries. "If every channel demanded huge, double-digit increases like what Viacom is trying to force our customers to pay, it would be impossible to keep the price of cable reasonable for our customers," he said in a statement. 

Viacom, meanwhile, disputed TWC's claims that it is negotiating in good faith. "For weeks they’ve ignored our requests for in-person meetings, and even in this late hour they’ve been slow and unresponsive to our outreach," Jafar said in an e-mail Wednesday.

SNL Kagan analyst Derek Baine said the dispute is the biggest carriage fight since Viacom pulled its signals from Dish Network in March 2004 after a two-day blackout. 

"In this recession, carriage battles could become bloodier as consumers and multichannel operators are simply more price-sensitive," Baine wrote in a research note Tuesday. 

He added that it's "a tough time for Viacom to pick a fight." The company has trailed its peers for some time in ad-revenue growth in part because of poor ratings at networks like BET, MTV Hits and VH1. Viacom earlier in December announced it would lay off 850 employees, or 7% of its work force.

Baine predicted the dispute would play out quickly, compared with the protracted fight between NFL Network and Comcast. 

"Viacom is too big a programmer for Time Warner Cable to lose, and Time Warner Cable is too big a customer for Viacom to lose," Baine wrote. "The only question is how much pain will be inflicted on Time Warner Cable subscribers and the customer service reps as myriad viewers call in asking what the dispute is about before the companies agree on a renewal price."