REGION: Settlement avoids cable channel blackout

Time Warner-Viacom reach New Year's Eve agreement

By COLLEEN MENSCHING - Staff Writer - and the Associated Press | Wednesday, December 31, 2008 11:18 PM PST ∞

A deal announced in the final hours of 2008 settled a contract dispute that had threatened to switch off 19 popular cable television channels for some North County customers.

Time Warner Cable Inc. officials said late Wednesday evening they had reached an agreement with Viacom Inc. that will prevent the threatened blackout of channels, including MTV and Comedy Central and shows such as "SpongeBob SquarePants" and "The Colbert Report," for about 15.7 million subscribers.

Details of the contract were unavailable Wednesday evening.

Time Warner cable customers in North County woke up Wednesday morning to see a "ticker" or "crawler" with a special message running across the bottom of some stations.

The message informed viewers that they would lose some of their favorite channels by the end of the day if Time Warner Cable Inc., which provides cable service, and Viacom Inc., which provides cable programming, could not strike a deal.

The contract between the two companies had been set to expire at midnight. The dispute was over how much the cable company pays in fees to carry certain popular Viacom channels, with the potential blackout of contested channels set for the first minute of the new year.

"I will be upset if it goes off the air," Vista resident Robert Acton said Wednesday. "That's what my niece watches, right there ---- she watches Nickelodeon."

Even the ticker that viewers woke up to was a point of contention Wednesday.

When the ticker stopped running Wednesday afternoon, some customers thought it meant the companies had reached an agreement.

But Marc Farrar, San Diego-area spokesman for Time Warner, said the ticker came down after Time Warner threatened legal action against Viacom, which broadcast the message. Time Warner disputed the ticker's claim that the company was responsible for the potential blackout, Farrar said.

Time Warner came to North County in 2006, buying parts of what was Adelphia Communications. At the time, about 70,000 former Adelphia Communications cable subscribers in North County became Time Warner customers, according to published reports.

Now that the feuding companies have agreed on a new contract, their fees may increase for cable customers, but Farrar said he couldn't guess how much that increase might be. It would probably not take place immediately because Time Warner recently finalized its 2009 pricing, he said.

Viacom said Americans spend a fifth of their TV time watching Viacom shows, but its fees make up less than 2.5 percent of the Time Warner cable bill.

McAndrew said that despite ranking high in the ratings, Viacom's cable networks' average daily license fee is 65 percent lower than that of networks run by The Walt Disney Co., News Corp.'s Fox, Time Warner Inc.'s Turner Broadcasting System and Discovery Communications Inc.

Analyst Michael Nathanson with Bernstein Research said Viacom's channels had been "underpriced relative to their peers."

Public carriage fee disputes of this scale between a programmer and a cable operator are not that common, especially when there's a threat of a blackout, said Derek Baine, senior analyst at SNL Kagan in Monterey. Typically, both sides agree on contract extensions as they negotiate on terms, he said, and any blackouts don't last long because TV operators get calls from outraged customers.

One prominent carriage fee fight in recent years was in 2004, between Viacom and EchoStar, the former name of Dish Network Corp. Shows were dropped for two days.

This time, Time Warner Cable faced Viacom, the largest cable programmer, not a small independent with a handful of channels.

"It's a must-have," Baine said. "That's probably why Viacom (was) playing hardball."

In a public relations blitz, Viacom took out newspaper ads showing Nickelodeon's animated bilingual heroine "Dora the Explorer" crying and clinging to her monkey pal, Boots.

"Why is Dora crying?" the ad asks. "Time Warner Cable is taking Dora off the air tonight!"

The ad urged viewers to call Time Warner Cable and demand that their favorite shows remain on the air.

Contact staff writer Colleen Mensching at (760) 739-6675 or cmensching@nctimes.com.