Copyright 2004 Gannett Company, Inc.
March 10, 2004, Wednesday, FIRST EDITION
In the latest flashpoint in the cable and satellite TV industry's battle with programmers over escalating costs, EchoStar Communications on Tuesday yanked all Viacom-owned CBS stations and cable networks off its Dish Network.
That meant 1.6 million subscribers in 16 cities woke up to no local CBS station, and 9.5 million nationwide were without 10 Viacom cable channels, including MTV and Nickelodeon. Adding a sense of urgency to the showdown: CBS is the network airing the popular NCAA men's college basketball tournament beginning next week.
EchoStar CEO Charles Ergen accused Viacom in a statement of "holding the public airwaves hostage" by asking for rate increases of up to 40%.
But Mark Rosenthal, president of MTV Networks, told reporters on a conference call that 40 percent is "a lot of malarkey" and the increase sought is "less than 10 percent."
Dish is giving subscribers a credit of $1 a month for losing cable networks and another $1 if they lost CBS. It is the No. 2 satellite network after DirecTV, which was taken over by News Corp. in December.
"This is the biggest in a new wave of programming disputes," said Craig Moffett, cable analyst for Sanford C. Bernstein. "DirecTV is probably the next shoe drop. The new management is looking at programming as a place where they can change the cost structure."
The EchoStar-Viacom matchup is the biggest programming-cost spat since Time Warner Cable blacked out ABC in several cities for a few days in 2000 in a fight with the Walt Disney Co. over the stations and a price increase for ESPN. Cox Communications and Disney recently agreed to a new ESPN deal after a bitter negotiation was resolved short of a blackout.
John Mansell, senior analyst for cable research firm Kagan World Media, said blackouts are typically resolved within a few days with cable or satellite operators taking the blame. "Consumers don't want to hear who's right or wrong. They just want their service."
This dispute has taken on a personal tone: EchoStar, which also filed an antitrust lawsuit against Viacom in January, gave out the home phone number of Viacom President Mel Karmazin to customers over the weekend via a recorded message. EchoStar spokesman Steve Caulk called it a mistake.
Viacom, meanwhile, through its phone operators and upcoming ads, is urging Dish subscribers to switch to a "reputable" cable or satellite operator.
EchoStar's cable rivals pounced in the Los Angeles area, where CBS was yanked. A coalition of Adelphia, Cox, Charter and Time Warner Cable launched radio and print ads urging EchoStar customers to "Dump the Dish" and call an 800 number to sign up for cable.
"It's not clear that anybody will win," Moffett said. "But it is clear that consumers, at least in the short term, are going to lose."