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Viacom, Time Warner at battle stations

Viacom sign

TEXT OF STORY

Kai Ryssdal: At midnight tonight SpongeBob Squarepants and Jon Stewart will have more in common than either might like to think about. Well, Stewart anyway.

Both could be casualties of a stalled licensing deal between Viacom and Time Warner Cable. Viacom wants more money for Nickelodeon, Comedy Central and its other channels. Time Warner isn't paying, as Marketplace's Sam Eaton reports.


Sam Eaton: It's a classic case of chicken. And with hours to go before its contact expires, Viacom has readied a series of TV spots that will air tomorrow in the event of a programming blackout.

Viacom TV Spot: You lost 19 of your channels. "Oh no!" Call Time Warner Cable now and say "NO!"

Viacom shows like Dora the Explorer, Southpark, the Daily Show and others account for more than 20 percent of total cable viewers. But company spokeswoman, Kelly McAndrew, says the licensing fees Viacom gets for those shows don't match up.

Kelly McAndrew: What we are trying to do is simply to get an appropriate value for the networks that we provide.

But it's a tough time to pick a fight. Time Warner's CEO, Glenn Britt, issued a statement today calling Viacom's request "outrageous" given the current economic conditions. It's asking for an extra $35 to $40 million in licensing fees. And TV consultant Larry Gerbrandt says passing those costs onto subscribers isn't going to be easy for Time Warner.

Larry Gerbrandt: They really have two choices, either to eat it or to drop the channel. Neither are palatable.

And Gerbrandt says, if Time Warner caves and gives Viacom more money, it opens the door for similar demands to other media companies.

Gerbrandt: It also sets the precedent for negotiations with every other cable network whose contract comes up for renewal.

He says that could cost Time Warner, and ultimately consumers, billions of dollars. But Viacom does have a secret weapon: If kids wake up tomorrow and find Nickelodeon blacked out, a lot of families may suddenly consider a switch to satellite TV.

In Los Angeles, I'm Sam Eaton for Marketplace.

About the author

Sam Eaton is an independent radio and television journalist. His reporting on complex environmental issues from climate change to population growth has taken him all over the United States and the world.
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This only points to the inevitable solution: ala carte pricing. Which, of course, will hurt both sides of the content/cable equation going forward. Premium pricing is obsolete any way you look at it. The cable monopolies and the programming giants both realize that the YouTube model -- watch what you want, when you want -- is the inevitable destination for all entertainment in the next decade. And this scares them to death.

That makes no sense. By leaving Time Warner to go to another provider, you are rewarding Viacom's actions and demands for more $$$ will continue to everyone else. And in the end, once Viacom has pushed every provider for more money, the will all pass the costs on to you. So leaving Time Warner in retaliation will only end up raising everyone's costs for TV. I say stick it out. They will resolve it eventually.

If Viacom and Time Warner don't come to an agreement we lose the channel Noggin. My 2 year old son loves that channel and if that happens we will be leaving Time Warner. They need to get their acts together. I know a number of other parents who are outraged by this and will leave Time Warner should this happen.

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