Update: A deal has been reached. Crisis averted. Viacom is demanding that Time Warner Cable pay more for the right to broadcast its networks, but TWC has refused. Tonight at midnight, 13.3 million subscribers in New York, Los Angeles, Dallas, and Cleveland will feel the effects of the stalemate first hand when Viacom makes good on its threat to pull all of its networks from TWC. Translation: no more “The Daily Show,” “Dora the Explorer,” “The Colbert Report,” “The Hills,” etc. But hey, there’s always Hulu and BitTorrent, right?

Rather than doing any actual negotiating, the two companies seem to have been hoping the threat of an angry, alienated customer base would resolve the issue. It hasn’t.

Time Warner Cable finally blinked last night, but it didn’t help:

Viacom has rejected Time Warner Cable’s request for a 15- to 30-day extension on the 12:01 AM January 1st deadline when the cable programmer pulls its 19 channels off the 2nd largest cable system operator. I’m told Viacom and TWC had no contact throughout yesterday until news of the Big Media battle broke. Suddenly, at 8 PM, TWC came to Viacom with an increase offer and the extension request. But Viacom rejected both out of hand. “It was bogus. The low-ball offer was clearly an excuse to ask for an extension and then use that in their press acrtivity today,” a Viacom source claimed to me. “After we’ve been trying to meet with them for several weeks, we won’t consider an extension unless they’re prepared to really negotiate and come across with a reasonable offer.”

So who’s to blame? Bloggers at the LA Times choose sides, but we were serious about that Hulu/BitTorrent comment—it’s possible that in this economy neither side will come out ahead by shutting the doors on its customers. Notice how both bloggers draw the same “maybe I’ll just find another way” conclusion:

Anti-TWC:

Time Warner’s dangerous gamble [is] that people can learn to live without what it’s selling. I already have, to some extent. When Time Warner pulled Turner Classic Movies from its basic cable lineup—in Hollywood, no less!—and substituted the Golf Channel, I didn’t bite and upgrade to premium. I’ve ended up buying a lot of the black and white classic films I love, and can now watch them on my schedule, not Time Warner’s.

Anti-Viacom:

[Viacom is making] the wrong demand at the wrong time. And the big loser here could be Viacom, which needs Time Warner more than Time Warner needs Nickelodeon, MTV, BET and the host of other Viacom cable networks.

You could argue that recessions are good for cable operators—people spend less on entertainment away from home, raising the value of packaged home-entertainment bundles such as cable and satellite. But as the jobless rate climbs, it’s hard to imagine Time Warner extracting sizable rate increases from their subscribers in 2009. More important, as Patt notes, Viacom puts its shows online, free of charge. So while it’s asking Time Warner for more money for its channels, it’s flooding the market with a cheaper version of the same product.

“Blackout looms in Time Warner, Viacom standoff” [Reuters]
“Unhappy New Year!” [Nikki Finke’s Deadline Hollywood Daily]
(Photo: Getty)

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