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News > Companies
ABC tuned out on cable
May 1, 2000: 6:36 a.m. ET

Disney network off Time Warner cable systems after transmission talks stall
By Staff Writer Franklin Paul
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NEW YORK (CNNfn) - A wrestling match between entertainment behemoths Walt Disney Co. and Time Warner Inc. suffered its first casualties Monday, after their extended dispute over transmission rights left millions of viewers unable to see Disney's ABC-TV programs on Time Warner cable systems.

In New York on Monday, viewers seeking local programming on the network's flagship station, WABC, were greeted with a blue screen and a bold, yellow banner headline proclaiming "Disney has taken ABC away from you." graphic

ABC countered with statements on local radio saying Time Warner pulled the channel, and encouraging listeners to urge Time Warner to bring back the station.

Time Warner (TWX: Research, Estimates), the parent company of CNNfn.com, said the decision affects 3.5 million customers across the nation, and comes after the media companies failed to reach a new agreement over the cost and terms of the rights to transmit ABC on Time Warner cable.

"We regret that Disney has pulled its ABC..." Time Warner's message said, adding that it cannot legally show ABC without Disney's retransmission consent. It went on to accuse Disney (DIS: Research, Estimates) of singling out Time Warner customers by rejecting recently submitted proposals that would have kept the stations on air while talks continue, even as ABC agreed to similar long-term extensions with other cable companies.

Months of fruitless talks


The impasse comes after four months of fruitless discussions between the two companies and several deadline extensions to strike a new deal on transmission rights. The multi-billion dollar conglomerates moved their bickering to a public forum on Monday, cranking out press releases and executives to plead their case and pointing the finger of blame at the other.

"We're shocked and dismayed that Time Warner would do this to their own customers," said Tom Kane, president and general manager, WABC-TV, in a release that mirrored statements from executives at other ABC stations. "We gave Time Warner our consent to carry our programming through May 24, so there was no reason for it. They unilaterally pulled us off their systems." graphic

"We were surprised at midnight when they yanked (ABC) away from their customers," Disney executive Vice President Preston Pearson, said on CNNfn's Biz Buzz. (166K WAV, 166 AIFF)

Pearson insisted that Time Warner broke the law by pulling the station from its system during a ratings 'sweeps' period, and has filed a petition with the Federal Communications Commission asking the agency to enforce compliance.

Not to be undone, Time Warner's executives blamed the situation on Disney.

"Disney is trying to inappropriately use its ownership of ABC television stations to extract excessive and unreasonable terms for its cable TV stations -- terms that would add hundreds of millions of dollars in costs for Time Warner Cable and its customers," said Fred Dressler, senior vice president of programming for Time Warner Cable, who said Time Warner lost the "legal right" to carry ABC stations at 12:01 a.m. Monday.

"We believed we had an agreement in December...they reneged on that agreement, and now there's a $300 million gap that they are trying to add on to the last agreement," Barry Rosenblum, president of Time Warner Cable, said on CNNfn. (206 WAV, 206 AIFF)

Consumers with cable can still watch ABC shows if they attach wire "rabbit-ear" antennas. In Houston, ABC distributed some 18,000 satellite dishes to residents so they could receive the network's programming should the signal come off cable. In New York, WABC radio chose to air

graphicthe audio of ABC's top-rated game show "Who Wants To Be A Millionaire" while its regular broadcast of New York Yankees baseball was in a rain delay.

Television experts said the ugly dispute is an example of the kind of skirmish that may arise in the so-called "New Media" era, where mega-mergers - such as Time Warner-America Online, Disney-Capital Cities/ABC, and Viacom-CBS - arm a handful of companies with powerful brands and diversified distribution channels. These giants may clash when their brands or channels cross, as in this case.

The issues: money and access


Time Warner's contract to carry ABC officially ended Dec. 31, but negotiations to renew that agreement continually stalled over how much Time Warner should pay to carry ABC's programming, as allowed under the 1992 Cable TV Act.

Disney (DIS: Research, Estimates) also wanted Time Warner to offer some of its other networks, including The Disney Channel, as part of its basic programming instead of paid premium channels, thereby broadening the number of homes that would receive the networks. In addition, Disney sought to offer other channels on Time Warner's systems.

"This squares off a wrestling match between branded content and means of distribution with Disney's array of household media names pitched against Time Warner's hefty strength in cable distribution," said Lee Westerfield, a senior media analyst at PaineWebber in New York. graphic

"Disney wants to launch a few networks, or two or three, and Time Warner wants to do that too -- but under what conditions?" he said. "Does Disney have to pay? And how fast will Time Warner roll them out into subscriber households?"

WABC's Kane said ABC has provided Time Warner five deadline extensions since the last contract expired. He said the pending Time Warner-AOL merger was having a "significant impact" on the negotiations, noting Time Warner had rejected two ABC proposals regarding non-discrimination and consumer access.

Experts said the development now puts pressure on Disney to renegotiate.

"Since the ABC stations have been yanked they will be a lot more amenable to reaching a solution," said Bill Croasdale, a media buyer at Initiative Media, a media and marketing services company in Los Angeles. "I would think that both parties will be sitting down very shortly and I wouldn't think that it will go on much beyond this week."

But Wit Soundview analyst Jordan Rohan told CNNfn's Biz Buzz that subscribers will likely blame the loss of some of their favorite programs on Time Warner, their cable provider -- a charge that could force Time Warner to make concessions in order to come to an agreement.

"I would imagine that given the (content) cards that Disney has to play right now, Time Warner will concede to a large degree," he said, adding that Monday's action will probably end soon. (245 WAV, 245 AIFF)

Viewers will find ways to watch shows


This is one of the worst times of year for either company to sustain a public relations black eye. All of the major networks are gearing up for the critical May 'sweeps' period, which helps determine what prices networks can charge advertisers in the coming months.

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During that period, the networks air specials like ABC's "Arabian Nights," and churn out high profile and season-ending episodes of popular series.

Still, experts say that despite the inconvenience, consumers would find ways to locate the shows they like most.

"With the likes of shows like the 'Who Wants To Be a Millionaire' series, people will find a way to get that through the air, so I don't think it will have any huge impact in the ratings that ABC will generate," Croasdale said.

Neither side gave any indication of when an agreement might be reached. Analysts suggested that while both companies would suffer public-relations bruises, neither of the deep-pocketed conglomerates would suffer financially --- for now.

"This is a much-looked-at border skirmish, which is not going to mar the overall cash flow strength of either company," said Westerfield.

Indeed, analysts suggest that cable subscribers would eventually benefit from the expansion of cable systems content, thanks to the addition of more channels and viewing choices. graphic

Disney has been one of the companies voicing their concerns to federal lawmakers in the wake of the Time Warner-AOL deal, that its programming may be squeezed from the vast Internet and TV networks of a merged America Online and Time Warner. Disney says it is not opposed to the merger, but wants to ensure that the issue of access is pursued before the government signs off on the deal.

Time Warner stock fell 1-1/16 to 88-7/8 on Monday, while Disney fell 1-5/8 to 42. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.