Time Warner vs. Viacom: Who's the Winner?

Business owners can take away some lessons from this very public show of wills.
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What a way to ring in the New Year! Two media giants,

Viacom

(VIA) - Get Report

and

Time Warner Cable

(TWC)

, spent the run-up to Dec. 31, 2008, locked in battle, posturing to see who could come off as tougher. On New Year's Eve, top execs missed the ball drop in Times Square: they were too busy negotiating a

last-minute truce

.

But did either side win? Was all the maneuvering worth it?

The world of business can occasionally feel like a gladiatorial arena. But public shows of strength don't always scare off your opponents -- or impress your customers. The trick is knowing when to stand up to a tough competitor or supplier, and when to avoid the blame game, put your head down, and get back to work.

As with just about every business story these days, the current brouhaha can be traced back to the troubled economy. Viacom -- which owns well-known cable networks such as

MTV

and

Comedy Central

-- has seen ad revenue drop over the past year. What's an easy way for the company to bring in more money? Demand Time Warner Cable to shell out more per customer to carry those channels.

That in itself is no surprise. Content providers want to be paid as much as they can for their programming. Just as content distributors -- like cable companies -- want to get that programming as cheaply as they can.

But this particular negotiation took an ugly turn. Time Warner decided to play hardball, refusing Viacom's higher per-customer charges. Giving in to Viacom, it seemed, might encourage other content providers to push for similar rate hikes.

We've all been stuck in similar situations, faced with what we think are unreasonable demands. We all understand the temptation to prove we're in the right. But by drawing a line in the sand right as an end-of-2008 deadline loomed, Time Warner gave Viacom the chance to paint them as the bad guy -- in public.

Viacom released a statement that came across as calm and reasonable, mixing bafflement at

Time Warner's stance

with a flurry of statistics. The increase, they said, would amount to less than a penny per day per customer for all 19 of MTV Networks' channels.

"Americans spend more than 20% of their TV viewing time watching our networks," they insisted, "yet our fees amount to less than 2.5% of what Time Warner generates from their average customer. Nevertheless, Time Warner Cable has dismissed our efforts at a fair compromise and has effectively chosen to deny its customers some of the most popular TV shows on the air."

That last dig must have especially gotten to Time Warner Cable President and CEO Glenn Britt, because he soon issued a statement that hit right back.

The reference to pennies, he said, "is misleading and insulting to our customers, from whom Viacom is trying to extort another $39 million annually -- on top of the hundreds of millions of dollars our customers already pay to Viacom each year." He then went on to call Viacom's actions "unreasonable" and "outrageous." Britt also claimed Time Warner had negotiated in good faith and made several concessions to reach a deal.

So who's the villain? Both companies were simply acting in their best interest. But Time Warner got pegged as the bad guy, especially after Viacom upped the ante by taking out full-page newspaper ads showing Dora the Explorer sobbing at the prospect of being taken off the air.

In the end, Time Warner caved. An executive with knowledge of the negotiations told

The New York Times

that Time Warner had agreed to pay more for Viacom programming, although neither side has revealed whether it was the full amount Viacom demanded.

Which leads me to wonder: Did Time Warner really think it could hold on to customers without marquee channels like

Nickelodeon

and

MTV

? By forcing Viacom's hand, did it gain anything other than (possibly) a slight fee decrease?

There's nothing wrong with getting your side of the story out there, especially if you think you're being treated unfairly. But make sure going public is going to pay off. For Viacom, it did: the company got more money for its programming and got to paint Time Warner as the party at fault.

Are you ready for the consequences of a public fight? Because sometimes, the only thing left on the battlefield is your dignity.

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.