Comedy Channel Merger Talks Stall : Television: Time Warner and Viacom say the deal is still possible. Local cable systems operators have apparently balked at promotion costs.

Negotiations between Viacom International Inc. and Time Warner Inc. to merge their two fledgling cable comedy networks have stalled while both companies are finding that local cable systems are reluctant to carry the networks.

Although officials at Viacom and Time Warner said a merger of the two cable networks is still possible, both sides admit that the talks are deadlocked and the prospect for a quick resolution is unlikely. Only a couple of weeks ago, sources familiar with the negotiations said a broad outline of an agreement had been reached and a deal was imminent.

“We thought we had an agreement in principle,” said Frank Biondi, president of Viacom. “The ball’s in their court.”

Viacom launched HA! on April 1 and now has more than 6 million subscribers. Time Warner’s Home Box Office unit launched the Comedy Channel last November, but it has not grown much beyond its original 6 million subscribers. HBO says, however, that it has commitments from local cable systems for at least 15 million subscribers. Generally, cable networks that carry advertising need between 25 million and 30 million subscribers to break even.

Both services are struggling to gain acceptance among skeptical cable system operators and advertisers in addition to competing in a market where there is limited channel capacity for new networks. Most cable operators now are more concerned about how to market their existing services than about assuming the additional expense of promoting new channels.

“I’ve said all along there’s only a 50-50 chance of a merger,” said Home Box Office Chairman Michael Fuchs. “The distribution is what drives it, and with the industry in a state of flux, it’s not the highest priority.” He admitted that HBO had not yet marketed or promoted the Comedy Channel. “We’re running it quietly right now.”

Biondi and Fuchs declined to comment specifically on why merger negotiations have stalled, but executives close to the talks said several factors combined to set back discussions, including a new demand from HBO that Viacom drop its $2.3-billion antitrust suit against HBO parent Time Warner. Viacom filed the suit last year, charging that Time Warner, which also is one of the nation’s largest cable system operators, monopolizes the pay television business.

The new demand caught Viacom by surprise. In the original handshake deal between Time Warner Chairman Steven J. Ross and Viacom Chairman Sumner M. Redstone to merge the comedy channels, Viacom had believed there was to be no “linkage” to the antitrust issue.

As originally agreed, Viacom was to have managed the advertising and affiliate relations for the merged channel, while HBO would have contributed programming.

But disagreements over the extent of HBO’s role in programming have kept both parties from reaching an agreement, sources said. Viacom executives believe that they are better at programming and managing so-called basic cable networks because of their experience with MTV, VH-1 and Nickelodeon, which all carry advertising and are part of the “basic” package that local cable systems sell to subscribers.

HBO, on the other hand, operates only pay networks, including Home Box Office and Cinemax, and does not have wide experience with basic networks. Two years ago, it folded a basic network named Festival after less than a year in operation when it failed to catch on. That experience has shaken local cable systems’ faith in HBO running a basic network.

Resumption of negotiations, executives said, will hinge on either HBO backing off its demand that Viacom drop its lawsuit or Viacom accepting a bigger role for HBO in the merged channel. Both sides haven’t budged from their positions in several weeks.

“God knows when this will come out,” said Viacom’s Biondi. “It has more chapters than a soap opera.”