Time Warner Cable, Viacom Cut Deal

Time Warner Chief Executive Glenn Britt on Wednesday had called Viacom's demand for a 12% increase in fees -- an extra $39 million on top of the estimated $300 million it pays Viacom annually -- extortion and outrageous given the recession. Viacom countered that the requested increase amounted to an extra $2.76 annually per subscriber.

Viacom had argued that Americans spend a fifth of their TV time watching Viacom shows but its fees made up less than 2.5% of the Time Warner cable bill.

Spokeswoman Kelly McAndrew said that despite ranking high in the ratings, Viacom's cable networks' average daily license fee was 65% lower than that of networks run by The Walt Disney Co.(DIS Quote), News Corp.'s(NWS Quote) Fox, Time Warner Inc.'s(TWX Quote) Turner Broadcasting System and Discovery Communications Inc.(DISCB Quote)

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, Calif. 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.(DISH Quote) Shows were dropped for two days.

In October, Time Warner Cable wrestled with LIN TV Corp., which operates local TV stations affiliated with NBC, CBS, Fox and CW. But this time, Time Warner Cable faced Viacom, the largest cable programmer, not a small independent with a handful of channels.