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Friday, March 12, 2004

Viacom back in the picture with EchoStar after dispute



By Catherine Tsai
The Associated Press

ENGLEWOOD, Colo. - In the end, EchoStar Communication Corp. says it got better prices from Viacom Inc. after an ugly dispute that cost 9 million satellite television customers channels such as MTV and Nickelodeon.

Two days after the Comedy Channel went dark on Dish Network satellite dishes, the companies agreed early Thursday to a long-term contract allowing EchoStar to offer its customers Viacom's channels at rates EchoStar CEO Ergen called fair.

"Like most negotiations, I don't think we got as good a deal as we wanted, but we got a deal that was good enough," Ergen said.

Financial terms were not released. Earlier, Viacom said it offered rate increases that amounted to 6 cents more per Dish customer per month, but Merrill Lynch analyst Jessica Reif Cohen estimated Viacom ended up with percent increases in the high single-digits.

"In terms of immediate pain, Viacom could probably inflict more on EchoStar than the other way around," Janco Partners Inc. analyst Matthew Harrigan said.

Ergen said he was pleased EchoStar has rates closer to what cable operators are paying, but he submitted to Viacom's demands that Dish carry the Nicktoons channel.

Contract extensions allowing EchoStar to show various Viacom channels expired at midnight Monday, and those channels went dark for roughly 9 million Dish customers early Tuesday.

The companies' dispute left as many as 2 million Dish viewers without CBS shows when Viacom pulled the network's programming in cities including New York, Los Angeles, Chicago, Philadelphia, San Francisco, Miami, Boston, Denver, Minneapolis and Dallas.

Subscribers in those cities could have lost the ability to use their dishes to watch the NCAA men's basketball tournament, which begins March 18 on CBS.

Viacom chief operating officer Mel Karmazin apologized for service disruptions.

Viacom and EchoStar began sparring after a contract for Dish to broadcast various Viacom channels expired Dec. 31. The contract was extended at least three times, with the latest court order expiring late Monday.

Viacom did its part to stoke viewers' anger by running ads with SpongeBob SquarePants blaming EchoStar for the programming blackouts for Dish customers.

It appears Viacom fared better with customers than EchoStar over the dispute, Guzman & Co. analyst David Joyce said. "Even though they went dark on Dish satellite homes in 16 markets, they were still on other cable operators and DirecTV systems, so it was a minimal loss for them," he said.

Ergen contended customers would appreciate EchoStar's efforts to keep prices low.

EchoStar had alleged Viacom tried to strong-arm it into carrying channels, including Nicktoons, at unfair prices in exchange for the right to also carry 18 CBS-owned stations in 16 markets.

"We wouldn't be able to survive without CBS," Ergen said.

The new deal also extends the length of Dish's contract to carry the CBS HD East and West, Spike TV and CMT channels.

Dish customers willget a credit of $1 if they lost CBS programming and $1 more if they lost Viacom channels during the blackout.




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