**UPDATE: Dec. 31, 10 p.m.: Blackout averted. Time Warner Cable and Viacom reach deal

**UPDATE, Dec. 31, 6 p.m.** Still no resolution. A look at the math behind the Viacom/Time Warner dispute: “If MTV goes dark at midnight, will Viacom offer $819,178 refund?”

**UPDATE, Dec. 31, 11:21 a.m.**  Time Warner just issued a new statement calling Viacom’s tactics extortion. Looks like the two companies aren’t anywhere close to resolving this issue and anyone watching tonight’s Miley Cyrus’ New Year’s Eve special on MTV will see a dark screen after midnight. Read the full memo from the cable company’s CEO. 

**UPDATE, Dec. 31, 10:32 a.m.** Bloomberg News is reporting that Viacom rejected Time Warner Cable’s request to extend discussions after January 1. Story also mentions that in total, Viacom is asking for a 15 percent increase in fees. 

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Cable TV ain’t cheap. And if the owner of Comedy Central, MTV and 17 other channels doesn’t get more, it will stop broadcasting those channels to Time Warner Cable customers on January 1. If the two companies don’t resolve the issue, their viewers will ring in the new year staring at a blank screen. 

Viacom Inc. is asking for 25 cents more per month per Time Warner subscriber, which the company says is less than one penny a day per subscriber (the Associated Press reports the per-subscriber fees come out to 23 cents more a month). If an agreement on what is known as “carriage fees” is not made by midnight Wednesday, Viacom will pull those channels.

Do we really want our MTV?

 ”I really hope they don’t pull them but what they are asking for is outrageous,” Fred Stefany, Time Warner Cable’s president of Los Angeles South and Orange County, said in an e-mail to me Wednesday morning.

In a statement late Tuesday, Viacom socks it to Time Warner in an attempt to win consumer sympathy. It mentions the upcoming cable TV price hike that Time Warner customers in Orange County will feel in 2009.

“Time Warner Cable subscribers who are being handed a January 1st $3 monthly increase in Raleigh, Orange County, Los Angeles, and New York City are simultaneously facing the removal of beloved shows across 19 channels.”

Viacom, which started to appeal to viewers and fans online and on TV Tuesday night, goes on to say that Time Warner “has so greatly undervalued our channels for so long” and that the increased fees are “reasonable and modest relative to the profits TWC enjoys from our networks.”

(For the first nine months this year, Time Warner reported a 3 percent increase in video subscriber revenuesto $7.9 billion, compared to same period last year. Viacom, meanwhile, reported $6.3 billion in revenues from its ‘media networks,’ which was an 11percent increase from the prior year. Viacom’s media networks include cable channels and the ‘Rock Band’ game franchise, but not its films. )  

Update 12/31: In a statement just before noon on Wednesday, Time Warner Cable CEO Glenn Britt called Viacom’s tactics extortion and rejected the notion that this is just a few pennies per customer. In a lengthy retort, Britt says Viacom wants an extra $39 million a year, which is on top of the “hundreds of millions of dollars our customers already pay to Viacom each year. That doesn’t sound like pennies to us,” Britt said.

“The issue is that they have asked for an exorbitant increase in their carriage fees and their network ratings are sagging,” Alex Dudley, a vice president at Time Warner Cable, told the Associated Press. ”Basically we’re trying to hold the line for our customer.”

Dudley also said that part of the disagreement is that Viacom offers its popular shows online as reruns and revenue made online isn’t shared with Time Warner. 

The channels that would be affected are Comedy Central, CMT: Pure Country, Logo, Palladia, MTV, MTV 2, MTV Hits, MTV Jams, MTV Tr3s, Nickelodeon, Noggin, Nick 2, Nicktoons, Spike, The N, TV Land, VH1, VH1 Classic, and VH1 Soul. If those channels go dark, 13 million subscribers will be cut off, according to the Associated Press story.

Earlier, Fred Stefany, Time Warner’s division president for Orange County and Los Angeles South, responded to readers explaining why the cable company must raise its prices next month. He mentioned that video service is going up because every sports network and “free” TV network (CBS, ABC, NBC, etc.) are demanding more money. Looks like those networks aren’t the only ones.

Added Dec. 31, 11:20 a.m.** Statement from Glenn Britt, President & CEO, Time Warner Cable

Christmas is over, but Viacom is still playing Scrooge, threatening to pull its MTV Networks off of Time Warner Cable at midnight tonight unless we ask our customers to pay exorbitant price increases. 

 Viacom claims their demands equate to “pennies,” but that 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. That doesn’t sound like pennies to us. Demanding that our customers pay so much more for these few networks would be unreasonable in any economy, but it is particularly outrageous given the current economic conditions.

 We sympathize with the fact that Viacom’s advertising business is suffering and that their networks’ ratings have largely been declining. However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers. We’ve negotiated in good faith and made several concessions to help reach a fair and reasonable deal. We’ve asked for an extension of the current contract while we continue to negotiate. But Viacom doesn’t appear to be interested in what’s fair and reasonable for American consumers – they’re only interested in propping up their sagging bottom line, and they are poised to pull their networks from Time Warner Cable customers tonight.

 Huge price increases like what Viacom is demanding threaten the ultimate value of cable TV. Time Warner Cable is a retail distributor of products we purchase wholesale. Wholesale programming costs are rising dramatically every year, and, like all multichannel distributors, we have to pass on at least a portion of the increases to our customers. Viacom’s MTV Networks are just a few of the hundreds of channels we carry. If every channel demanded huge, double-digit increases like what Viacom is trying to force our customers to pay, it would be impossible to keep the price of cable reasonable for our customers. 

 Time Warner Cable has reached hundreds of distribution agreements with other networks. In fact, we currently have deals with every other cable programmer. The negotiations aren’t always easy, but we work hard to reach agreements that are fair to our customers and to both businesses.

 We hope Viacom won’t pull the MTV Networks from Time Warner Cable customers, and we’ll negotiate up to the last possible minute and beyond. But ultimately, it is Viacom’s decision. We implore them to join with us to reach a fair resolution or grant an extension, and we hope they won’t carry through with their threat to take their networks away from our customers tonight.

Other views:

• Viacom Channels May Go Dark In Time Warner License Dispute (Broadcasting & Cable)
• Viacom May Pull Channels Off Time Warner Cable in Contract Spat  (Bloomberg)
• Viacom, Time Warner Cable face midnight deadline (LA Times)
• Statement from Viacom (Viacom)

Recent Time Warner Cable stories:

• What has Time Warner Cable done for you lately? (Dec. 30, 2008)
• Time Warner Cable raising prices in 2009 (Dec. 29, 2008)
• Time Warner Cable ‘adopts’ O.C. families (Dec. 24, 2008)
• Time Warner’s O.C. phone outage felt in Hawaii (Dec. 23, 2008)
• The weekly Time Warner Cable status report (Dec. 22, 2008)
• Is Time Warner Cable’s Internet outage really fixed? (Dec. 16, 2008) 
• Time Warner Cable Internet outage fixed (Dec. 11, 2008)
• Feds to look closely at cable TV firms pricing, channel changes
• Time Warner’s new HD channels and why Costa Mesa, Tustin get them first
• Time Warner Cable’s new features finally coming to O.C.
• Time Warner still cleaning up cable merger mess in O.C.
• How to get cheaper cable TV from Time Warner Cable
• How to get cheaper cable TV in O.C., part 2

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