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Mar 9, 2004  •  Post A Comment

EchoStar’s Ergen Apologizes for Dropping Viacom, Defends Company Position

EchoStar Communications CEO Charlie Ergen on Tuesday apologized to his customers for dropping Viacom-owned television stations and cable networks from the satellite company’s DISH Network service, and vowed to get the channels back on the lineup as soon as possible.

Speaking during “Charlie Chat,” a live question-and-answer session with EchoStar customers, Mr. Ergen described DISH subscribers as having been “caught in the middle of a dispute” that was triggered by what he characterized as Viacom engaging “in some acts that are against the rules.”

He then took call-in questions and e-mails from subscribers who appeared fairly evenly split between being upset that their favorite Viacom channels had gone dark and supporting Mr. Ergen’s efforts to control rising programming costs.

Mr. Ergen said the imbroglio between EchoStar and Viacom started when the satellite operator tried to secure a retransmission agreement for the CBS stations that Viacom owns.

“We asked for a rate and a price on CBS by itself, and CBS came back and said the only way to give you CBS is if you sign a deal for 13 other Viacom channels-channels that didn’t have a value for you or that we didn’t think were appropriate,” Mr. Ergen explained to viewers, adding that EchoStar had already inked deals with 90 companies that owned CBS affiliates and that he was willing to give CBS’s owned and operated stations rates at the high end of the range he secured with station groups that owned CBS affiliates.

In addition, Mr. Ergen said Viacom had demanded that EchoStar, which has about 9 million subscribers, pay programming fees for cable channels that exceeded prices paid by smaller cable operators.

“This is an unconscionable act. We don’t believe that we should be extorted,” Mr. Ergen said. “Viacom crossed a line using CBS and the public airwaves. We took those signals down because they wouldn’t capitulate to negotiating a rate for CBS and then everything else.”

Mr. Ergen also disputed the assertion by Viacom that the programming fee hike amounted to 6 cents.

“Nothing could be farther from the truth,” he said. “If it were only 6 cents, then we would sign that contract. They are really talking about 15 percent to 25 percent premiums.”

Mr. Ergen said he remained hopeful that the two companies could hammer out an agreement, and that executives from both sides are working toward that goal.

“I would say we are pretty close in terms of an agreement in principal, but the details have to be worked out,” he told his subscribers. “We look forward to getting this dispute behind us.”

Chernin Says He’s Staying Put at News Corp.: News Corp. President and Chief Operating Officer Peter Chernin on Tuesday put an end to speculation that he might bolt for the top job at The Walt Disney Co., saying he is happy with his current employer and hopes to be around to see it grow further.

“I wouldn’t be in this negotiation [of a new employment contract with News Corp.] if I weren’t happy with the company,” Mr. Chernin said at an investor conference in Palm Beach, Fla., sponsored by investment bank Bear Stearns. “I am happy. I love this job. And more importantly, this company has truly unparalleled opportunities for growth and I would like to be around to enjoy it.”

Now that News Corp. has No. 1 satellite operator DirecTV under its control, the company will be looking to leverage its might as a player in distribution and content, Mr. Chernin said.

“We are writing a new chapter in what a media company should be,” he said.

The executive also gave cable operators a clear warning that when it comes time to renew the carriage agreements for Fox News Channel, they had better expect to pay rates that are commensurate with the network’s recent success.

Noting that the average cable operator pays a monthly subscriber fee of 23 cents per month to carry FNC, FNC has twice the audience of CNN, whose rate is 43 cents, Mr. Chernin promised his company would be aggressive in securing rates that reflect FNC’s strength.

Senate Panel Votes to Raise Indecency Fine, Put Limits on Violence: The Senate Commerce Committee voted 23-0 today to approve legislation that would raise fines for indecent broadcasts to as much as $500,000 and for the first time in history could subject violent TV programming whether originating on broadcast, basic cable or satellite TV channels to the same punishment.

In addition, the legislation approved would block any part of the Federal Communications Commission’s media ownership deregulation from going into effect for up to a year while the General Accounting Office studies whether media ownership consolidation has spurred off-color programming.

The media ownership provision would roll back the regulations to where they stood on June 1, 2003-the day before the FCC’s Republican majority voted to relax caps that barred broadcasters from owning daily newspapers in their markets and limited the number of stations a company could own in a particular community or nationwide.

The prohibition on violent TV programming was added in an amendment by Sen. Ernest Hollings, D-S.C. It would essentially bar “excessive or gratuitous violence” from broadcast, basic cable and satellite TV channels between the hours of 6 a.m. and 10 p.m. in the interests of protecting children.

Assuming the legislation is ultimately enacted, the violence provisions will not automatically go into effect. They’re supposed to be adopted only if an FCC study first confirms that V-chip technology and voluntary industry programming ratings that allow parents to block objectionable programming on TV are not effectively protecting children-a case that Sen. Hollings maintains has already been clearly and repeatedly made. “Monkey see, monkey do. Children will mimic what they see on TV,” said Sen. Hollings. “I just couldn’t stand by and do nothing.”

If enacted, the measure would for the first time subject basic cable and satellite TV programming-currently exempt from indecency oversight-to direct content regulation. At today’s vote, Sen. Hollings also introduced an amendment that would have required cable operators to offer their programming a la carte, allowing consumers to buy and pay for only the programming they want. But he withdrew the measure after it became clear that he didn’t have the votes to support it.

An amendment by Sen. John Breaux, D-La., that would have subjected basic cable and satellite TV programming to the same indecency rules broadcasters face was defeated in a 12-11 vote. Under a series of amendments that were approved, the Senate bill would subject the first indecent broadcast on a station to a fine of up to $275,000, with the second punishable with a $375,000 levy. A third violation could result in a fine of up to $500,000. All the fines could be doubled if the FCC determines that “aggravating factors are present.” In addition, the FCC would be required to launch proceedings to revoke the license of any broadcaster who violates the indecency prohibitions three times during a license period. Still another amendment clears the way for broadcasters to adopt a code establishing a two-hour carve-out for family viewing in the evenings.

In a statement, the National Cable & Telecommunications Association said it would oppose the anti-violence initiative-a provision the association said raises constitutional concerns. “As the U.S. Supreme Court has found, the subscription nature of cable service and the ability of cable customers to block unwanted programming through the use of tools offered by local cable systems strongly differentiate cable from broadcasting, which is distributed free and unfiltered over the air,” said Brian Dietz, an NCTA spokesman. “As announced last week in letters to members of Congress and FCC Chairman [Michael] Powell, the cable industry has committed to further increase its efforts to educate customers about using the tools available to them to block programming they find unsuitable for their families. From a First Amendment standpoint, we continue to believe that there are less intru
sive means to accomplish the objectives sought by this amendment.”

Joan Van Ark to Join ‘Young and the Restless’: Joan Van Ark, who starred in two of CBS’s signature prime-time soaps, “Dallas” and “Knots Landing,” will join the cast of CBS’s most powerful daytime drama, “The Young and the Restless,” starting Tuesday, April 6. Ms. Van Ark will play Gloria Fisher, the mother of veteran Michael Baldwin (Christian LeBlanc) and newcomer Kevin Fisher (Greg Rikaart).

Cozen Resigns at KDKA: VP and General Manager for KDKA-TV/WNPA-TV Gary Cozen has resigned unexpectedly after 11 years with Viacom-owned KDKA in Pittsburgh. It was uncertain Tuesday when Mr. Cozen will depart, but until his successor is named, the stations’ executives will report to Viacom Television Stations Group President Fred Reynolds and Executive VP and Chief Operating Officer Dennis Swanson.

In a memo to the staff Monday, Mr. Cozen said, “I want you to know the TV Station Group has always acknowledged KDKA’s great achievements, including its audience ratings, revenue and profit, and viewer respect.”

Locally, he was known as cost-efficient and combative. In 2001 it was discovered that extra commercial inventory was squeezed into a network football game on KDKA. Since that incident the practice has been forbidden at CBS-owned stations.

Iger Defends Board Response, Predicts Beefier Comcast Bid: Walt Disney Co. President and Chief Operating Officer Robert Iger on Tuesday defended the Disney board’s response to last week’s push by shareholders for management changes, expressed hope that ABC would soon stage a comeback and said he expected cable giant Comcast to sweeten its offer to merge with the media company.

Speaking at Bear Stearns’ media investor conference in Palm Beach, Fla., Mr. Iger dismissed suggestions that the company’s board did not take seriously the message sent by shareholders during last week’s annual meeting in Philadelphia. At the meeting in Philadelphia, CEO Michael Eisner’s leadership suffered a massive blow with 43 percent of the shareholder votes cast to re-elect the board withheld support for him. Hours after the record no-confidence vote, the Disney board stripped Mr. Eisner of his chairman title and named presiding director George Mitchell non-executive chairman.

“Obviously, we took it very seriously,” Mr. Iger said. “We feel there were a number of factors at work, including momentum that was corporate-governance-generated.

“But it went well beyond that,” he said. “We are well aware that there is a significant amount of shareholder discontent about the company’s performance and that management is not being held accountable enough. The board came away from Philadelphia and the annual shareholders meeting with an appropriate understanding of what is going on. Not in any way are we making light of it.”

Mr. Iger also stood by the board’s decision to install Mr. Mitchell as chairman despite the former senator from Maine receiving a 25 percent no-confidence vote last week.

“George has been on the board for nine years,” Mr. Iger said. “He has an unbelievable reputation and a tremendous amount of integrity, and he is clearly someone who has demonstrated an ability to act. There is something reprehensible about questioning his integrity.”

Mr. Iger said he expects Comcast to come back to the Disney board with a more robust offer, though he said he doesn’t know when that might happen.

“Brian looks to the future, and realizes that having content is going to be a lot more valuable and imperative,” he said, adding that if and when Comcast comes to Disney with a higher offer, “our board will take it seriously and consider it appropriately.”

Meanwhile, Mr. Iger said, he takes full responsibility for the languishing prime-time results at ABC, which he called “disappointing.”

“Prime time, there’s no question about it, since the collapse of [‘Who Wants to be a Millionaire’] has been a real mess,” he said, adding that turning around the network will take some time.

Mr. Iger also defended Disney’s purchase more than two years ago of ABC Family, which he described as recovering on the ratings and advertising fronts after being whipsawed by the advertising slump and the impact of Sept. 11, 2001. He added that while some have criticized the company for overpaying for the channel, the deal involved much more than a cable channel: It also included a 6,000-title film library and a collection of European networks.

Speaking about the battle brewing between EchoStar Communications and Viacom over retransmission fees, Mr. Iger said EchoStar stands to lose a lot more than Viacom in the fight.

“It is a mistake for a platform to deprive customers, it is unbelievably dangerous,” he said. “Time Warner learned this the hard way when they took us off in New York and Houston, and the pressure was so great from consumers, politicians and investors that they folded in a day. [EchoStar’s] Dish Network is going to see a similar reaction.”

On a more personal level, Mr. Iger said the overlooking of his name as a possible successor to Mr. Eisner “comes with the territory,” and though “it hurts a little bit … I’m a big boy.”

“I learned a long time ago that it’s about performance and you have to deliver,” he said. “I have to deliver and we have to deliver as a management team. If we create growth, then my chances improve. If they don’t, I shouldn’t get the chance.”

Sundance Channel Acquires Four Docs: The Sundance Channel has acquired the pay television rights to four documentary films that debuted at the recent 2004 Sundance Film Festival, the network announced Tuesday.

The four titles are “The Five Obstructions” by Jorgen Leth and Lars Von Trier (a look at a filmmaker’s struggle to remake a short subject); “Garden” by Ruthie Shatz and Adi Barash (about young male prostitutes in Tel-Aviv, Israel); “Investigation Into The Invisible World” by Jean Michel Roux (an investigation into Icelandic beliefs in the supernatural); and “Screaming Men” by Mika Ronkainen (a light-hearted look at Screaming Men Choir).

Airdates have not been announced.

McHale to Become Discovery CEO: Discovery Communications founder John S. Hendricks plans to pass his title of CEO to Judith McHale, now president and chief operating officer.

The move will take place June 17, which marks the beginning of the company’s 20th year. Mr. Hendricks will remain chairman of Discovery Communications.

Comcast to Carry NBA TV: Comcast Cable will carry NBA TV under a long-term agreement that gives Comcast the ability to offer some NBA content over its video-on-demand platform. The deal will increase the amount of high-definition programming Comcast offers subscribers. NBA TV initially will be offered on special digital tiers to Comcast customers.

Comcast Cable President Steve Burke said no price point had been determined for NBA TV. Other financial terms of the deal were not disclosed.

EchoStar Pulls Plug on Viacom Channels: The retransmission-fee fight between Viacom and satellite operator EchoStar Communications took on larger proportions Tuesday when EchoStar pulled the plug on 16 owned-and-operated CBS stations and 10 Viacom-owned cable networks after the two companies failed to reach a new carriage agreement by a March 8 midnight deadline.

EchoStar’s move had been widely anticipated given the impasse between the companies, both of which have spent the past few days drawing their respective lines in the sand. Viacom Chairman and CEO Sumner Redstone said Monday night that he refused to grant EchoStar a sweeter deal than ones offered to larger pay-TV companies, such as Comcast or DirecTV. An estimated 1.6 million EchoStar customers are affected.

The back and forth between the companies continued Tuesday, with EchoStar accusing Viacom of using “strong-arm tactics” in its request for 40 percent rate increases over the length of its contract and what EchoStar described as Viacom’s “demands for carriage of low-interest channels.”

For its part, Viacom officials said they were “dismayed and disappointed” by EchoStar’s action, saying they have “solid business partnerships with virtually eve
ry other satellite and cable TV operator — except for EchoStar/DISH Network.” The media company urged customers to switch to another satellite or cable operator to gain access to the channels.

The affected O&O stations are in New York, Los Angeles, Chicago, Philadelphia, San Francisco, Dallas-Fort Worth; Miami-Fort Lauderdale; Boston, Baltimore, Detroit; Denver; Minneapolis, Pittsburgh, Salt Lake City, Austin, Texas, and Green Bay, Wis.

The cable networks affected include MTV, MTV2, MTV Espanol, VH1, VH1 Classic, BET, Comedy Central, Nickelodeon, Nick Games & Sports, Noggin, CBS-HD East and West.

As a result of the suspension in service, EchoStar said it would credit customers affected by the CBS-channel suspension $1 a month until the matter is resolved. A similar $1 a month credit will go to customers who used to get the Viacom cable networks as part of certain DISH Network packages.

Starz! to Launch Encore in HD: Starz! Encore plans to launch its Encore channel in high definition March 22. Encore HD will be carried on Cablevision’s Voom HD satellite service. The channel will offer first-run recent hits and library titles.

Cablevision Digital Customers Reach 1 Million: Cablevision now counts more than 1 million digital customers, and its iO digital product is the fastest-growing service in the company’s history, Cablevision said. The company added more than 700,000 new digital customers in 2003 alone. More than 33 percent of Cablevision’s subscribers have the digital service, up from 6.5 percent at the end of 2002.