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Dish Network CEO Charlie Ergen threatens to permanently drop Viacom channels

Dish Network

Dish Network Chief Executive Charlie Ergen said Wednesday that his company was prepared to permanently drop Viacom TV channels if the two sides couldn’t come to agreement on a new carriage contract.

(David Becker )

Dish Network, one of the nation’s largest pay-TV companies, said Wednesday that is prepared to permanently drop Viacom’s cable channels, including Comedy Central, Nickelodeon and MTV, if a new deal cannot be reached.

The two companies are on the brink of a blackout of Viacom’s channels on the system serving Dish’s nearly 14 million satellite TV customers. After negotiating for months, the companies are facing a deadline of 9 p.m. Pacific time Wednesday to reach a new carriage contract.

There is no guarantee that a blackout would be a brief interruption, Dish Chairman and Chief Executive Charlie Ergen suggested during a conference call with Wall Street analysts to discuss his company’s earnings.

But he noted the two companies have made progress in the talks since last weekend and that he was hopeful that a deal could be reached.

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“There probably is a path to continue carriage, but it’s not done yet,” Ergen said. “And obviously the devil is in the details.”

Viacom investors cheered the news, sending the company’s shares up nearly 5%, or $1.74 a share, to close at $37.38. The shares recovered some of the ground they lost on Tuesday, when investors began worrying that Viacom might be dropped by Dish.

Ergen, during the conference call to discuss Dish’s first-quarter earnings and the company’s business prospects, said Dish would not agree to a new deal unless the economics made sense.

He said he didn’t want to waste time bickering with companies that are primarily interested in scrounging for dollars rather than developing strategies to confront the significant challenges facing the TV industry. Viewers are migrating to lower-cost streaming services and away from linear TV.

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“I would rather spend my time with companies who are a bit more forward-thinking,” Ergen told analysts, singling out the Walt Disney Co., which was quick to embrace Dish’s Internet TV service, Sling TV. 

“You can put your head in the sand. Or you can say, hey, the world is changing and let’s go out and change with the world,” Ergen said.

But the maverick CEO strongly hinted that he would like to make a deal with Viacom.

“We’d like to get a deal done,” he said, adding that the partners have had a long and productive relationship. But the companies negotiated their last carriage deal seven years ago, and the TV landscape has changed dramatically since then.

“Seven years ago, Viacom was a lot stronger on our systems than they are today,” Ergen said. “But they still have valuable stuff.”

The stakes are huge for both companies. Viacom risks losing tens of millions of dollars annually in affiliate fees from Dish at a particularly difficult time, when the company is suffering from a plummeting stock price and has debt payments looming.

Viacom already has announced that it plans to sell a stake in its Los Angeles movie studio, Paramount Pictures, in part to raise funds to pay down debt.

Meanwhile, Dish has lost thousands of customers in the last two years and it does not want to see an exodus of viewers angry that they don’t get Nickelodeon, VH1 or Comedy Central.

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Two cable companies, Suddenlink and Cable One, about two years ago separately dropped Viacom, deciding its channels were no longer critical to their programming lineups. Those companies did lose some customers when they dropped the Viacom channels -- but that was a calculated risk.

“Consumers have spoken loudly and clearly,” Viacom said in a statement. “Over the past 24 hours, hundreds of thousands of concerned subscribers have reached out to implore Dish to negotiate reasonable terms with Viacom for continued carriage of our networks.”

A day earlier, the company said: “We have offered Dish a best-in-class deal at rates and terms as good as larger distributors, with additional services and features for their customers.”

Ergen, during the earnings call, said Viacom -- and other TV network owners -- should be careful to avoid a repeat of the dispute raging in Los Angeles over the cable TV channel owned by the Los Angeles Dodgers. Only two carriers have agreed to carry SportsNet LA -- Time Warner Cable and Charter Communications. 

All the other distributors, including Dish, have said the Dodger channel is too expensive.

“Somebody overreaches and thinks that the Dodgers are worth whatever they said they were worth, and people look at it and say ‘no’,” Ergen said. “Unless we own the Dodgers, we can’t pay that kind of money.”

These carriage disputes only are going to intensify, Ergen predicted.

“There are going to be some food fights between any number of companies and content providers in the future,” he said.

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Twitter: @MegJamesLAT

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