In Depth
Viacom, Time Warner Reach Agreement
Viacom and Time Warner Cable have reached an agreement in principle that ends the threat of Viacom channels, including MTV, Comedy Central and Nickelodeon, being pulled from the cable operator's systems.
The agreement was reached just after midnight Eastern Time, when Time Warner's carriage deal with Viacom was set to expire. The settlement cuts short a game of chicken in which Time Warner Cable would have had to contend with angry customers and Viacom eventually may have lost advertising revenue.
The dispute got ugly fast, with Viacom deploying some of its channels' favorite TV personalities, including SpongeBob SquarePants, to pillory Time Warner Cable. In return, Time Warner Cable went after Viacom's financial soft spots, including ratings declines and advertising weakness at some networks.
After the settlement, Time Warner Cable President and CEO Glenn Britt said the company is pleased that its customers will get to continue to watch Viacom's programs.
"We are sorry they had to endure a day of public disagreement as we worked through this negotiation," he said in a statement.
Viacom President and CEO Philippe Daumann said the agreement benefits his company's audience and is in the best interest of both companies.
Before the settlement, Viacom said it was seeking “reasonable and modest" increase in fees relative to the value TWC gets from its networks. In a statement, Viacom said it was asking for about 25 cents a month more per subscriber for its 19 channels.
Time Warner Cable said Viacom's demands would have cost $39 million more annually.
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.
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,” Mr. Blaine 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 expected 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.
(Editor: Baumann. Updated 10 a.m..)
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Comments 4
Abigail
I find it deplorable that Time Warner asked its customers to do its negotiating work. And not so wise, either: with a product like entertainment programming, related as it is to fantasy and escape, your customers don't want to worry about your business model.
I have seen a flood of negative comments, like the one posted here by un happy with u $ hungry B's, related to this standoff throughout the blogosphere — most entertainingly at http://www.dlisted.com/node/29974
I hope the losers in this agreement aren't going to be the customers paying higher fees for a service model that is falling out of date as TV moves online.
Ms. J Black
I'm so pleased with this! I don't know if I could live without a healthy dose of Steven Colbert, or without other programs like Spongebob and Futurama.
Sure, maybe they'll milk us for more cash, but I think Viacom has a fair request, considering tons of us spend all our TV time on Nick or MTV.
I mean, Disney's shows aren't nearly as popular, they only have Hannah Montana and High School Musical to hold on to, and Hannah Montana isn't as popular anymore, anyway.
Once the Jonas Brothers graduate from Disney Tween Academy, like Britney Spears (who I know kind of let her life go to the toilet) and Taylor Laurent did, Disney will be toast.
In the end, I was relieved when I flipped to Comedy Central last night to find that it was still there! :)
Abigail
Ms. J Black's comment is interesting in that she thinks that Viacom's request for $0.25 extra per viewer from TWC is fair, but Ms. J Black seems to base her opinion on the fact that Viacom has TWC where they want them (she really needs the Daily Show, Spongebob and Futurama) rather than on an analysis of the business case.
This thuggish rationale will have us paying ridiculous rates for quality content before long.
S
Could it be that because of the loss of customers to foreclosure, the lost customer base is being divided (Thus More Expensive) Why should TW have to live on reduced revenue?
Joe Public has to bail everyone out you know!