Time Warner Restores ABC Programming with Temporary Truce

Updated from 5:43 p.m. EDT

Time Warner(TWX Quote) reconnected ABC television to 3.5 million cable customers Tuesday, making temporary peace with ABC's parent Walt Disney(DIS Quote) in a dispute that had blacked out programming to some of television's largest markets.

The two media giants agreed to reinstate an expired transmission agreement that will last until July 15, while they continue to negotiate the issues that led Time Warner to quit broadcasting ABC early Monday morning.

Prior to reaching the agreement, Time Warner said it had filed a formal explanation with the Federal Communications Commission detailing why it terminated ABC programming the day before. On Monday, Disney asked the FCC to intervene on its behalf, and pressure had been growing on Time Warner to restore the service.

The highly public spat took another turn squarely in the media spotlight Tuesday when, in the midst of a Time Warner press conference in New York announcing its offer to extend the current agreement through Oct.15, Disney contacted Time Warner with a counteroffer to extend the agreement through July 15. Time Warner executives interrupted the press conference to huddle briefly, and then announced the accord.

"What we wanted to do is pick a date that was close enough so that this [deal] would be something we'd focus on getting done," said ABC spokeswoman Julie Hoover.

FCC Chairman William E. Kennard said in a statement about the truce: "The television sets of average consumers should never be held hostage in these disputes. The game of brinkmanship played this week deprived viewers of ABC network programming. This should never happen again. I urge these companies to resolve their differences and put this entire matter behind them."

TV screens that had been blank on ABC channels returned with "General Hospital" at midafternoon.

The extension means that millions of viewers in New York, Los Angeles and five other television markets will be able to tune into ABC programs such as the megahit game show "Who Wants to Be a Millionaire," the Kentucky Derby and the series finales of all of ABC's primetime shows.

The agreement does not resolve any of the issues that led to the impasse in the first place; it does, however, put ABC back on the air in the country's biggest markets in the midst of the critical "sweeps" period, when local advertising rates for the next TV season are set. For the networks, May is a much more crucial period than July, when TV viewership typically declines and the networks broadcast reruns of their programs.

On Monday, Time Warner terminated ABC programming to 3.5 million cable customers because of what it called Disney's unreasonable financial demands. Disney called Time Warner a dangerous monopolist and liar in what has turned into a bitter brawl.

Before Time Warner Cable President and Chief Executive Joseph J. Collins announced the agreement, Time Warner executives continued to denounce ABC and its Disney parent, signaling that a long-term agreement may not be reached all that quickly.

"At the end of the day...it is about charging our customers more money," said Fred Dressler, senior vice president at Time Warner and chief negotiator with Disney. Disney wants "more distribution for more networks at considerably higher prices," Dressler charged. Dressler was referring to ABC's desire to move the Disney Channel from premium to basic service and to add two new cable networks, SoapNet and Toon Disney. Time Warner says such a move would cost upward of $300 million.

"Wanting to restore service as quickly as possible to those who depend on us, we too are willing to compromise," ABC said in a statement.

Even with the blackout, "Who Wants to Be a Millionaire" remained the most widely watched TV show Monday night.

Despite losing access to millions of homes in the three of the largest television markets in the country, Regis Philbin, the host of "Who Wants to Be a Millionaire," swamped the competition.

The phenomenal popularity of ABC's "Millionaire" was considered the first potential programming victim of the brawl, which posed big problems for Disney because it coincides with the "sweeps" rating period used to calculate advertising fees. As it turned out, however, Disney had little to worry about.

Thirty-four percent of all TV viewers were watching "Who Wants to be a Millionaire" on Monday. None of the shows on the other three big networks came close.

Buoyed by its lead-in from "Millionaire," the concluding night of ABC's mini-series "Arabian Nights" beat NBC's "The 70s" by 36% in the ratings race.

"Millionaire's" strength Monday night was something of a surprise, said Marc Berman, who closely tracks TV ratings for trade publication Mediaweek.com.

"I knew ABC would win, but was surprised how potent Millionaire was," Berman said. "My guess is with the Time Warner coverage that ["Millionaire's"] 23.0 rating would have been 24.1 and I think "Arabian Nights" would have been more like an 11.0."

Berman cautioned that NBC, a unit of General Electric (GE Quote), is off to a strong start in the sweeps period -- during which local advertising rates for next season are set -- and "ABC needs every possible rating point and will not benefit by this." In other words, the temporary agreement with Time Warner could not have come at a better time for Disney-ABC.

Each rating point equals 1,008,000 television households; share is the percentage of sets tuned to a specific show.

Monday night's telecast of "Millionaire" featured TV star David Duchovny, Kathie Lee Gifford and comedian Dana Carvey.