Viacom, Time Warner Cable Spar Over Fees


Viacom is threatening to pull all 19 MTV Networks channels from Time Warner Cable's 13.3 million subscribers at 12:01 a.m. on Jan. 1, as the companies have failed to come to terms on carriage fees.

In a statement issued Tuesday night, Viacom said it has asked Time Warner Cable for an increase of less than 25 cents per month per subscriber and accused the cable operator of "overreaching for profit at the expense of its viewers."

Time Warner Cable president Glenn Britt, in a statement, said Viacom's claims that its price increase demands equate to “pennies” is misleading and "insulting to our customers, from whom Viacom is trying to extort another $39 million annually – on top of the hundreds of millions of dollars our customers already pay to Viacom each year." 

Britt said the MSO has negotiated in good faith and 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. "However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers."

An increase of 25 cents per month per subscriber would total about $40 million in additional fees given Time Warner Cable's 13.3 million basic video customers. The MSO's major markets include New York City, Los Angeles and northeast Ohio.

If the companies fail to reach an agreement by midnight Wednesday, MTVN's Nickelodeon, Comedy Central, MTV, VH1 and other services will potentially be yanked off Time Warner systems.

"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. "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."

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.

One of Time Warner Cable's objections to the hike in carriage fees is that Viacom replays shows on its own Web sites and generates advertising revenue that it does not share with the cable operator, Time Warner Cable vice president of public relations Alex Dudley said, according to the Associated Press.

"We don't think that's fair," he said. "They're trying to have their cake and eat it too online, where anybody can get it for free."

Time Warner Cable executive vice president and chief strategy officer Peter Stern, speaking on a panel at the CTAM Summit '08 last month, urged programmers to work with cable operators to distribute TV content to paying customers over the Internet instead of offering it online for free. 

“The question of whether broadband video upends the cable business lies with the programmers,” Stern said. “What we’re not comfortable with is putting content online for free that we’re offering to customers because at the end of the day, it’s the same screen. That makes no sense and ultimately will undermine the affiliate fees that are critical to create that great content.”