EchoStar ( DISH) floated higher Thursday as investors celebrated a thaw between the direct satellite broadcaster and TV titan Viacom ( VIA.B). The agreement that broke the three-day programming deadlock "turned out to be a fair and balanced long-term deal," CEO Charlie Ergen said on a noon conference call. Ergen spent much of the call explaining the deal, noting that he and Viacom President Mel Karmazin were personally involved and that the great majority of the 48-hour standoff was consumed by lawyers completing documentation. Though the pact came with side deals he'd rather have avoided, "CBS is an essential channel," Ergen told investors. "We really wouldn't be able to survive without CBS." Enthusiasm about the end of the stalemate -- which will return CBS to EchoStar's Dish satellite network just in time for the NCAA basketball tournament, due to start next week -- overshadowed the other issues that arose Thursday morning. Most notably, EchoStar delayed its scheduled financial report for the fourth quarter ended Dec. 31, saying it would delay filing its 2003 financial results to deal with bookkeeping issues raised by the Securities and Exchange Commission. The company also said it added 340,000 new subscribers in the fourth quarter, which was above Wall Street's estimates. On Thursday, EchoStar added 81 cents to $34.93 and Viacom rose a quarter to $38. The accounting questions don't appear to be huge, involving some $26 million in past-years product reserves that may have to be reversed. Schwab Soundview analyst John Hill, who rates EchoStar stock a buy, characterized the restatement as "minor," as did UBS analyst Aryeh Bourkoff, who rates its bonds hold. More to the point, in Wall Street's eyes, is that the programming agreement ends an acrimonious dispute between the television content and delivery giants. EchoStar had portrayed its media partner as a monopolist trying to force a portfolio of unpopular networks onto its satellite network while collecting exorbitant fees. Viacom had protested that it couldn't cut anyone a special deal.
On Thursday's call, Ergen outlined the terms of the give-and-take that broke the ice. Ergen said his big win was eliminating what he called the "DBS premium" -- higher payments for programming than even smaller cable operators would make despite the number of subscribers that satellite broadcasters are adding relative to cable. Ergen conceded that he was less happy with what he called Viacom's practice of linking CBS with its less attractive cable channels. To that end, Ergen said he hadn't wanted to add Viacom's Nicktoons channel to the Dish lineup, but agreed to do so because "that was very important to Viacom." Larger cable operators, Ergen said, had already agreed to add the yet-to-be-launched channel. "We hated to do that," Ergen reiterated, pointing out that Nicktoons is taking programming space from independent programmers such as Oxygen and PBS Kids. The calm ending to the feud comes after an uproarious week for Englewood, Colo.-based EchoStar. On Tuesday morning, EchoStar pulled Viacom's programming from the Dish Network, leaving Dish's 9.4 million subscribers without access to Viacom channels and pulling CBS stations from the Dish-delivered local programming package in cities including New York, Los Angeles, Chicago and Philadelphia. The events come as EchoStar confronts an industry landscape recently remade by Rupert Murdoch's acquisition of a controlling stake in Hughes ( HS), which owns the DirecTV satellite broadcaster that competes directly with EchoStar. EchoStar itself was rebuffed by regulators in an earlier attempt to buy Hughes. Meanwhile, Viacom Chief Sumner Redstone said Monday he'd be open to buying into the cable TV industry Viacom has recently shunned, though Redstone rejected the prospect of a tie-up with EchoStar. While EchoStar's Ergen is a "smart guy," Redstone said, "I wouldn't want to be No. 2." On Thursday, Ergen said EchoStar's next big programming negotiation will come later this year with the Fox ( FOX) unit of Murdoch's News Corp. ( NWS). Ergen says he doesn't anticipate big problems with Fox because of a consent decree News signed to get its Hughes deal done, and the long relationship EchoStar has had with Fox. All that said, Ergen didn't rule out using similar tactics the next time negotiations like the Viacom one comes up. Speaking generally, Ergen said EchoStar gets, "by a large factor," more complaints about raising prices than it does about taking channels down.