Viacom And Time Warner Cable Play Chicken; Programmer To Pull Networks Over Fee Dispute
Subscribe to Time Warner (NYSE: TWX) Cable and have a kid with a Dora addiction? Get ready to pop in DVDs. Need your daily fix of The Daily Show? You’ll have to go online or mobile unless TWC and Viacom (NYSE: VIA) call a halt to the latest round of cable chicken. That’s the game content providers who want rate increases—or in the case of the just-settled Belo-Charter situation, retransmission payments—and cable operators play with viewers in the middle. In this case, Viacom says it’s asking for an increase of less than 25 cents per month per sub for its 19 networks; TWC claims 13.3 million video subscribers.
Unless the two reach a last-minute deal, the programmer said Tuesday night it will pull its networks from TWC at midnight Wednesday when the current three-year agreement ends and launch an ad campaign featuring Dora, Kenny, Sponge Bob, Steve Colbert and others. That includes Nickelodeon, Comedy Central, MTV, and VH1. One source familiar with the situation calls it a “very low double-digit” increase but, as is usually the case with cable programming licenses, while Viacom is happy to toss around all kinds of stats in its statement, it’s not offering the current fee.
More, including an update, after the jump
Meanwhile, TWC cites online access as a reason not to pay an increase. Spokesman Alex Dudley told the WSJ: “They are asking for huge increases and we don’t know how we are supposed to sell this to our customers in this economy. ... Their content is no more valuable on the first of January than it is today, especially because they are putting most of their top-rated content on the Web for free.” For good measure, Dudley suggests the ad downturn is the reason for the increase demand: “Their business model is failing, so they’re trying to prop it up on our customers’ backs.” To which I have to say, poppycock. Cable nets routinely ask for price increases in good times and bad. Cable operators routinely say no until, usually, the two reach a settlement. That’s how the game is played. Is pushing back this time TWC’s way of helping its customers, as Dudley would have it, or of preserving its own cash flow as it prepares for a spin off from parent Time Warner? Is Viacom seeking a larger increase because of the economy? Doesn’t really matter in the long run.
The timing may be particularly good for Viacom, since it dovetails with a TWC fee increase in New York City, LA and other markets. It also comes as people are relying more on entertainment at home. But don’t underestimate the potential backlash from viewers irked by both players in this game of chicken, particularly at a time when people are looking for reasons to cut back. Will subscribers switch to satellite or Verizon’s FiOS because they can’t get Dora or Jon Stewart on Time Warner? Some might, particularly if it stretches out. Will some shrug and find something else to watch—or go to places where Viacom isn’t paid by the sub? Yes. Will either company come out truly ahead? Doubtful.
Update: A little detail on what TWC pays for video programming, its highest expense: as of Sept. 30, TWC’s video costs were up 7 percent year-over-year to $23.58 per sub compared with $21.94 and accounted for nearly half of the cable operator’s expenses. According to the Q3 10-Q, programming costs rose both because of contractual increases and an increase in the number of subscribers getting expanded programming. In the 10-Q, TWC said it expects its profit margins will continue to narrow because of increased video programming expense: “Video programming costs represent a major component of TWC’s expenses and are expected to continue to increase, reflecting programming rate increases on existing services, costs associated with retransmission consent agreements, subscriber growth and the expansion of service offerings. TWC expects that its video service margins as a percentage of video revenues will continue to decline over the next few years as increases in programming costs outpace growth in video revenues.”
Posted In: Media & Publishing, TV, Cable & Telecom, Companies, Time Warner, Viacom
Comments (27)
Dec 31, 2008 7:37 AM
I’ll gladly pay to keep these channels.
Dec 31, 2008 9:35 AM
I’d pay too. This is BS! Time Warner is too big a monopoly, especially in my area, to cut channels. I really don’t want satellite, but I would consider it if they cut my channels. I LOVE Nickelodeon…I’m 29 and love Spongebob…Comedy Central too. Come on Time Warner…Get your heads out of your tails and keep the stations. That content may be online, but think of families that don’t have, can’t afford or can’t get high speed internet where they are…Another big company trying to make money. They won’t pay to keep these stations, but watch our rates go up anyway…with less stations. Gotta love big business.
Dec 31, 2008 11:22 AM
I’d pay too! My daughter would be DEVISTATED if she couldn’t watch noggin or nick. I see where Time Warner is coming from, and I see where Viacom is coming from; it’s a crappy economy and everyone is trying to get more money where they can. In my opinion, if they raise my cable bill, and the money goes to keeping another company from going under; I’ll gladly sign the check. But, you can bet that I will switch to another provider if these two can’t come to an agreement. What a way for my daughter to start the new year, without her favorite shows, which are a large part of why we even have cable. Well, I guess kids will just have to go back to playing outside, or reading books… :-)
Dec 31, 2008 11:30 AM
Just what I come to expect from Time Warner continue to raise our rates and give us less for their already overpriced product. I honestly don’t care if they get rid of the so called music channels that have nothing to do with music anyway, but to take Nick and the rest of channels is bs. $ime $arner won’t give us the NFL network they add channels that no one really watches they raise our rates but can’t pay out a little more to keep a couple of good channels. Let me guess they will add another news channel or shop at home network or mabey thaey can make a deal to get another LMN lord knows we can’t do without another show staring Judith Light. I guess I will have to switch to Direct tv even though I will have to watch the local news from NYC or Chicago. Good luck to those of you that decide to stick with $ime $arner I hope you enjoy wasting your money.
Dec 31, 2008 11:49 AM
Yes the concept of kids playing outside or reading a book seems far fetched ,but if a parent sets boundries on both physical activites and other to include some tv this still don’t let Time warner of the hook for takeing our money and not giving a good product in return. Both of my childern are actve in sports but when nov thru apr roll around and it is 0 deg outside and it gets dark at 4:30 in the afternoon they need something to do other than just read a bookor play outside . I agree that reading is important, as well we don’t live in the 50s or 60s anymore and limted tv is just fine, but if we dont get what we pay for and it just keeps getting worse why would anyone be willing to payout more money to get something we alredy have and pay to much for now?
Dec 31, 2008 12:17 PM
I too see it both ways. Sure we shouldn’t be raising the costs in this economy right now…but I see a case of 2 huge companies trying to make a fast million dollars. Why don’t their CEO’s and higher ups take a pay cut? When their execs are making over a million dollars salary for a year…Give me a break! Sure being an exec of a huge company is hard work, a million dollars a year salary PLUS other compensations totaling over $18 Million for some?? (check links below) Holy crap! What can you possibly be doing to earn almost $20 million a year?? I’d retire after a year…And this is both Viacom and Time Warner execs. I’m not picking on one company here.
MTV and such can bite the dust anyway. MTV - Music Television…so where’s the music…Same with VH1, but Nickelodeon?? That’s the kicker right there. I don’t want another Home Shopping Network/QVC station or something in place of these stations. Nick and Comedy Central are my fav. stations…Even if we’re not parked in front of the TV, they’re usually playing in the background. Ahh well…Either way our rates will go up anyway…greedy executive jerks. I keep trying to call the number scrolling at the bottom of Nick right now and conveniently the message is “we’re experiencing technical difficulties” and it hangs up… Grrr….
Check these links out for salary and other info on these execs :
Time Warner:
http://www.companypay.com/executive/compensation/time-warner-inc.asp?yr=2008
Viacom:
http://www.companypay.com/executive/compensation/viacom-inc.asp?yr=2008
Dec 31, 2008 12:43 PM
Talk aboud greed. Come on people, give a little. I don’t think you guys are
hurting for cash.
Dec 31, 2008 1:01 PM
Wow considering these two companies are .08 miles and 2 min away from each other they seem to be wourlds apart.
Dec 31, 2008 1:02 PM
This is absolutely infuriating. The only reason I subcribed to TWC in the first place is for NICK channels and comedy central, the two most watched channels in my home. If what viacom is saying is true, and the rate increase would be a little over 20 cents a month, I don’t think anyone would be cancelling their subscriptions over it. If we can afford cable as it stands right now, the incrase of $3.00 a year isn’t going to make much of a difference. My children will be devastated if they can’t watch Drake and Josh, iCarly, and Spongebob everday, and I’ll just be pissed if I have to miss the Daily Show! Yes, I have internet access, but I’m not going to allow my 2 and 3 year olds to play with my computer to watch these programs. Not to mention the fact that I am an online student, and not only am I always on the computer, but these shows help occupy my children’s time so I can accomplish my school work. Losing nearly 20 channels just doesn’t seem worth the monthly price I pay to TWC right now, and I will not hesitate to switch to another provider if it comes down to it. I think if this does happen, TWC is going to see a drastic decrease in revenue. Maybe they should consider what their customers are really paying for instead of clashing with corporate heads over money. Hello DirecTV!
Dec 31, 2008 2:23 PM
I just want to shed some light on this situation. It is not that Time Warner wants to make money or just remove the channels from the air. I work for Time Warner and BELIEVE me this is not what we are trying to do. The negotiationed price is EXTREMELY high for the very same programs Viacom is offering. If we expect the price the only people that will still be affected is the consumers. Your rates will go up to support the cost Viacom wants to charge. Its not that TWC dont want to pay the .25 increase per customer, but look at that cost for 13.3 million customers. You do the math. If this was your company would you not do everything in your power to make the negotiated price low so the consumer has a minimum inpact. People tend to only look at situations like this one sided. Do you think by going to Directv and other companies is going to change this becuase the rate increase will affect them as well when their contracts are over and what do you think will happen then. You will pay MORE!!!! Use your head people.
Dec 31, 2008 2:27 PM
I agree Jamillah. People are outraged becuase of children programming going off the air. What happened to kids going out side to play? My kid watch maybe 3-4 hours of tv per month. When i was growing up i watched cartoons for 1 hours on Saturdays and then my mother sent me outside to play. TV is raising our kids and this day and age even the cartoons are violent. People wake up it is so much more going on in this world besides TV. Pick up a book or better yet read one to your child. It would benefit them more.
Dec 31, 2008 2:31 PM
You people keep saying you would pay but let me see you send Time warner a check for 660 million dollars for the programming. I heard people canceling there service due to rate increases of less than a dollar but now becuase a company is trying to save you money you are say ” oh i will pay for that”. This is BEYOND SICKENING!!!
Dec 31, 2008 2:47 PM
They can not do this. I love a lot of the channels that are in jeopardy. I will as well be willing to pay what ever the extra amount will be to keep these channels. I hope this does not happen, I will be very disappointed if this happens
Dec 31, 2008 3:02 PM
Keep in mind that even though you may be willing to pay the extra amount to keep your Viacom programs Time Warner may not be able to charge you for these b/c of your current contract. My customer contract with Time Warner is locked for 24 months and for that they would loose $6.00/ in 2 years. So if you take all the customer contracts with TWC and see what they would loose then TWC is practicing smart business. I too will be upset about loosing these channels but sometimes you get, for lack of a better word, screwed. Viacom just had a major layoff b/c of the current economic state and part of it has had to do with contract negotiations.
Dec 31, 2008 3:53 PM
I will be switching to Dish tomorrow if my channels are cut, plain and simple. Those are basically the only channels watched in thie house and I refuse to pay $70 for crap I don’t care to watch.
Dec 31, 2008 4:33 PM
Seriously. Time Warner is increasing my rates $3 per month in 2009, and they claim that they’d need to pass this cost along to the consumer? Of course they don’t have to - although they might like to. If they’re selling me cable, presumably they would need to pay a fair price for the networks they provide - they don’t just get to print money because they want to.
Dec 31, 2008 6:02 PM
What youall have to remember is that Viacom is not the only network. Their ratings have been sagging and they want a big increase. Its all about network rating that depends on how much money they should get. If the networks with higher ratings sees that they are getting paid less or equal then they too will demand higher rates. That would go for all the networks. This in turn wouldn’t be a .20 increase per customer your talking every network on the line up wanting an increase. I can see Time Warners view.
Dec 31, 2008 10:44 PM
I am very upset about this arugement. The channels being cut are channels that my entire family enjoys - toddlers, pre-teens, teenagers, adults, and grandparents. If we lose these channels, I will be devastated.
Dec 31, 2008 11:53 PM
Don’t watch any of the Viacoms channels….
So you go Time Warner!
Viacom, you ain’t worth in increase!
Jan 1, 2009 12:58 AM
Having been in the corporate environment for many years, I can definitely understand how TWC would want to make a stand against Viacom demands. However, knowing that doesn’t really help me ;) My 5 year-old son is on the autism spectrum and a part of his daily routine includes watching Noggin programs at certain times of the day. I won’t go into a lengthy explanation of this neurological/developmental disorder, but breaking this specific routine will likely cause… issues (where ‘issues’ = cataclysmic emotional meltdown). It’s gonna be a fun week! Thanks, Viacom!
Jan 1, 2009 1:05 AM
I work with Time Warner Cable and there are alot of loop holes here. Viacom is raising the price to provide these channels to our customers. Do you really think it will end here and stop here. As Viacom rates continue to decline they will be pulling off the same situation with other cable providers. Since Viacom rates were poor in 2008 they decided to pick out Time Warner Cable and Brighhouse cable customers to raise prices just so they can make up for lost revenue last year.
Its not really a problem of wanting to raise the prices to our customers its really about how Viacom is specifically hitting Time Warner Cable customers and Brighthouse customers. Why did they not hit Comcast?(Largest cable provider in the nation.) Why not raise prices with DISH or Direct TV. Due to loses in 2008 for Viacom, they picked out Time Warner Cable/Brighthouse to raise prices.
Time Warner Cable is doing all they can to work out a reasonable deal. If the channels do black out is it the end? NO. Even if the channel do black out we will still be going through negotiations and at some point in time will have those channels back whether it is an increase to us or our customers. For all I am concerned about is.. thank Viacom for the trouble.
Thanks and hopes this clears up any other questions.
Jan 1, 2009 2:37 AM
this is total BS! there is no way I am paying for something that has been free for well over 20 years! that is crap and there will be tons of backlash from this!!
Jan 1, 2009 3:50 AM
Time Warner isn’t trying to raise your bills. Do a little research and you might find that TWC is trying to keep the costs down. Think about this the next time you call in and complain about a price increase.
Jan 1, 2009 3:51 AM
Since when has anything been free? You have been paying for these channels.
Jan 1, 2009 12:26 PM
All TV was free when I was growing up. Of course there were just 3 channels. The thought of pay TV was like Sci Fi. I am not a TW fan, but from what I understand, Viacom was asking for a better than 25% increase in fees. That’s a considerable jump.
Jan 1, 2009 5:50 PM
And we didn’t have most of the programming we have now. Like it or not, the subscription model pays for most of today’s programming and syndication fees subsidize “free” TV.
Re the situation resolved “in principle” last night—Viacom was not asking for 25 percent. Viacom says 12 percent, TWC says15 percent.
Mar 3, 2009 11:17 AM
The real problem on this issue is that the cable programmers (and even local networks with retransmission) are not letting cable companies subscribers choose whether they are willing to pay or not. They are forcing all of these channels into the “basic” package and they are required to pay. Studies show that when you separate out ESPN required channels and Fox Sports channels and put them into a separate tier and ask people if they are willing to pay just the amounts being shoved down cable’s throat, less than 20% say they are or will. If you make ESPN “whole” with the reduced penetration and still the same level of income, the cost goes to over $32 per month to view sports. The rights system would soon collapse if this was allowed to be handled fairly. Of course, that would mean AROD wouldn’t $25 million a year, a slightly above average outfielder wouldn’t pull in $14 million, Kurt Warner wouldn’t pull in $10 million, or so forth. They might just have to settle for one or two million.