Viacom Threatens to Pull MTV Programming off Time Warner Cable

Fee Dispute With Carrier Faces Jan. 1 Midnight Deadline

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NEW YORK ( -- Viacom is enlisting beloved characters such as SpongeBob SquarePants and Dora the Explorer in a fee dispute with Time Warner Cable going nuclear.

Viacom is threatening to pull all 19 MTV Networks, including MTV, Nickelodeon and Comedy Central, off Time Warner Cable systems seconds after midnight Jan. 1 unless the cable operator agrees to a hefty fee increase.

Newspaper ads
Viacom is taking the dispute public tomorrow with an ad campaign featuring SpongeBob and Dora on TV, newspapers, radio and the web in Time Warner Cable's biggest markets, including New York, Los Angeles and Dallas.

Viacom is asking for an increase of 25 cents a month per subscriber, representing what Time Warner described as a 15% increase from the current deal, which expires at midnight.

"We make this request because TWC has so greatly undervalued our channels for so long," Viacom said in a statement. "Americans spend more than 20% of their TV viewing time watching our networks, yet our fees amount to less than 2.5% of what Time Warner generates from their average customer."

Time Warner Cable spokesman Alexander Dudley argued that Viacom is asking for an unreasonable increase in a down economy while eroding cable's exclusivity over distribution by putting shows on the web.

TWC: 'Declining ratings' for MTV Networks
"With the economy right now, and the declining ratings at the MTV Networks, a 15% increase is a lot to ask for," he said. That full episodes of top-rated shows such as Comedy Central's "The Daily Show With Jon Stewart," "The Colbert Report" and "South Park" are available for free online gives the subscription even less value. Last fall, Viacom added Comedy Central's two signature shows, "The Daily Show with Jon Stewart" and "The Colbert Report," to the free online service Hulu.

Mr. Dudley added that Timer Warner Calble is still in negotiations with Viacom.

Carriage disputes between TV networks and cable systems are commonplace; ESPN and Cox Communications fought a bitter, public dispute over fees just a few years ago. This latest game of chicken threatens to remove shows such as "SpongeBob," "The Daily Show With Jon Stewart" and "The Hills" from huge swaths of the two top media markets in the U.S.

Starting tomorrow, Viacom is commencing a media blitz with Dora and SpongeBob in tears. "Why is SpongeBob crying?" one print ad asks. "Time Warner is taking him off the air tonight along with 19 of your favorite channels."

The ads direct viewers to DirecTV and Verizon Communications' FiOS as alternatives to keep Viacom programming.

Stagnant ad market
Viacom has been hammered by a stagnant ad market this year, meaning it must rely more than ever on robust fee increases to maintain growth. Worldwide ad sales dropped 2% at the media company in the third quarter due to weakness in autos, beverage and video-game advertising.

Earlier this month, Viacom cut 850 positions, or 7% of its work force and froze senior executive salaries for 2009.

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Andrew Hampp contributed to this report.

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