Viacom Threatens to Pull MTV, Other Networks Off Time Warner Cable
Even with SpongeBob SquarePants in its corner, this is a tough time for Viacom to be picking a fight with one of its biggest distributors, Time Warner Cable.
Unless an agreement is reached, Viacom tomorrow will pull its networks, including Nickelodeon, MTV and Comedy Central, from Time Warner Cable, and start running advertisements featuring the usually friendly cartoon character blaming the cable operator for the disruption.
Viacom says it is seeking an increase that is “reasonable and modest" relative to the value TWC gets from its networks. In a statement, Viacom says it is asking for about 25 cents a month more per subscriber for its 19 channels.
A Time Warner spokesman says Viacom is seeking “huge” increases in the double-digit range. “We don’t see how in the current economy we can pass these increases along to our customers,” the spokesman said, adding that the operator has sought an extension from Viacom, but has so far been turned down.
Derek Baine, an analyst at SNL Kagan, estimates that in 2007, Viacom received about $2.27 per subscriber per month from cable operators. That means the 25 cent increase Viacom is seeking is about a 10% bump.
“It’s a tough time for Viacom to pick a fight,” Mr. Baine says. Viacom’s networks have been trailing the industry in advertising revenue growth and it has had ratings problems at key networks including BET, MTV and VH1.
“Although they are working hard to correct this, asking for a rate increase on these channels will be tough,” Mr. Baine says. “Viacom's leverage comes in part from Nickelodeon. Although it's the most expensive network in the MTV Networks stable at its average rate card of 45 cents per sub per month, that price seems cheap given the fact that it has much higher ratings than TNT (owned by Time Warner) and half the rate card.”
Of course, it’s not a good time for cable operators to be fighting with programmers either.
“In these challenging economic times, cable operators are going to see howls from subscribers at the sign of any rate increase, not to mention additional churn that could come with it,” he said. “In this recession, carriage battles could become bloodier as consumers, and multichannel operators are simply more price sensitive.”
While the fight between NFL Network and cable operators has dragged on for years, Mr. Baine expects a settlement between Viacom and Time Warner Cable to come quickly.
“Viacom is too big a programmer for Time Warner to lose and Time Warner is too big of a customer for Viacom to lose. 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 a renewal price is agreed upon,” Mr. Baine said.
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