Time, Viacom Near Accord to Merge 2 Comedy Channels

Time Warner Inc. and Viacom Inc. have reached a rough agreement to merge their respective cable television comedy networks, executives familiar with the negotiations said late Wednesday.

“We have an agreement in principle, but there are still some minor details to work out,” said an executive close to the negotiations. However, the executive said an announcement could still be a week away.

Time Warner and Viacom have been holding discussions for several months about merging their fledgling cable comedy channels, both of which are struggling to attract subscribers and advertisers.

Time Warner launched the Comedy Channel last November to a subscriber base of 6 million homes, and Viacom premiered Ha! on April 1 with only 4 million subscribers. Executives at both companies remain convinced that there is a demand for an all-comedy cable channel, but system operators who carry the services do not believe there is room for two competing services.

According to executives close to the negotiations, the combined comedy channel would be managed by a board composed of representatives from Time Warner, Viacom and any cable system operators who may become equity partners in the combined service. Time Warner and Viacom would be equal shareholders, while the cable operators collectively would own less than a one-third stake.

“We are pretty comfortable at this point,” said one executive. “We believe some of the cable companies will come in for a piece of the equity.”

Earlier this month, Time Warner threatened to sue five of the country’s largest cable operators that were negotiating to buy an equity stake in Ha!, which is operated by Viacom’s MTV Networks division. The cable operators included Tele-Communications Inc., Comcast Corp., Continental Cablevision, Newhouse Broadcasting and Cox Cable. The deal would have boosted the channel’s subscriber base to 20 million homes.

Time Warner feared that any such deal would lock out the Comedy Channel from systems owned by those operators, and the company threatened to sue on antitrust grounds. The threat was apparently taken seriously enough that negotiations were dropped.

But a rough start for both comedy networks and limited channel space on cable television systems has forced Time Warner and Viacom back to the negotiating table.

Viacom, although it launched Ha! with fewer subscribers than the Comedy Channel’s, has one important bargaining chip: a $2.5-billion antitrust lawsuit that it filed against Time Warner’s HBO last year, alleging that HBO monopolizes the pay television business. Industry analysts have speculated that Viacom would drop its lawsuit as part of any merger deal, but a Viacom executive Wednesday evening denied that there was any link between the lawsuit and the proposed comedy channel merger.

“The two are separate issues,” the executive maintained. Viacom Chairman Sumner M. Redstone has been taking a hard line on the lawsuit, insisting that it not be linked to any deal to merge the comedy networks.