Audio Video News

Echostar Communications and Viacom Inc. have settled their rate hike dispute. The two adversaries reached an agreement late Wednesday, March 10. Within twenty minutes of signing the deal, Viacom programming returned to the Echostar lineup.

In a hardball negotiating tactic, the Colorado-based satellite broadcaster had deleted popular channels such as BET, Comedy Central, MTV, Nickelodeon, and VH1, from feeds to major cities across the US, including depriving approximately 2 million subscribers of CBS television shows. Echostar and Viacom had been in negotiations since their previous contract expired December 31. The last court-ordered contract extension ended Monday, March 8.

As many as 9 million Echostar customers went without Viacom-owned programming for most of Tuesday and Wednesday. Undertaken just a week before CBS begins broadcasting the NCCA Men's Basketball Championship series, the move was a desperate measure taken by Echostar to force a compromise on rate hikes demanded by Viacom, but it backfired when thousands of DISH subscribers called in protest, according to the Associated Press. "It was the outcry from the viewers that truly, I think, brought EchoStar back to the negotiating table,'' said an MTV spokeswoman. ''They called us by the thousands and thousands.''

Some DISH subscribers went beyond protesting. A few threatened lawsuits for breach of contract, and at least one made good on the threat. Subscriber Rebecca Dolan sued Echostar in San Francisco Superior Court. "Dish is saying that it has the right to eliminate critical aspects of its programming packages," stated her attorney, Eric Gibbs, "Yet its customers have no right to terminate their relationship ... unless they pay a termination fee of up to $240."

EchoStar has promised to reimburse customers between $1 and $2 a month for the blackout. As part of the deal, DISH will offer new Viacom programming, including the Nicktoons cartoon channel, Spike TV, CMT, and CBS HD East and West.

Echostar CEO Charlie Ergen issued an apology to subscribers, at least a few of whom are likely to get their TV signals elsewhere once their DISH contracts expire. "We understand that this has been a difficult few days for our customers, and we thank them for all the encouragement they have given us throughout," Ergen said in a joint statement with Viacom. "We also look forward to a long relationship with Viacom in which we can provide their quality channels to our viewers." Viacom chief Mel Karmazin thanked DISH subscribers ''for their patience and support.''

Background on this development can be read below:

March 9, 2004 - Echostar Communications Corporation has made good on a threat to delete CBS programming from its DISH Network feeds to sixteen cities. The March 9 move had been promised if Viacom Inc., didn't compromise on rate hikes it was seeking from Echostar. Viacom is the media giant that owns CBS Television, Paramount Pictures, Paramount Home Entertainment, Blockbuster Video, and the Viacom cable service.

Echostar blocked transmission of signals from CBS-owned and operated stations in 16 cities, leaving as many as 1.6 million people without CBS programming. The satellite service continued delivering CBS signals in markets where the CBS affiliates were privately owned, but dropped other Viacom programming nationwide, depriving as many as 9.5 million Echostar subscribers of MTV, Nickelodeon, and other popular channels.

The move leverages the upcoming CBS broadcast of the NCAA men's national basketball championships against Viacom. Should the shutout continue, sports fans in Los Angeles, New York, and Miami may have to get their round ball fix from other providers.

"We are dismayed and disappointed by EchoStar/DISH Network's decision to pull the plug on our channels," read an official statement issued by Viacom the same day. "We tried for months to reach an accommodation that would allow them to continue carrying CBS, Nickelodeon, Nick at Nite, Comedy Central, MTV, BET and many of our other channels, but EchoStar/DISH Network refused to entertain a reasonable proposal or to negotiate in earnest. We have solid business partnerships with virtually every other satellite and cable TV operator-except for EchoStar/DISH Network."

VIacom's statement pointed out that Echostar has raised its subscription fees by as much as $3/month per subscriber, but has been unwilling to accommodate Viacom's request for a "six cents per subscriber" increase in rates. The stock market reacted to the CBS deletion in Echostar's favor, pushing the company's shares up 2.4% and Viacom's down 0.9%.

The two adversaries have been in negotiations since January. Last week, Echostar accused Viacom of "extortion" in attempting to raise rates by as much as 40%, according to Echostar CEO Charlie Ergen.

Echostar's attorneys later corrected that estimate, saying the dispute was over a rate increase of less than 7%. Viacom officials insist that the rate hike they are seeking is only 5% annually. Echostar had also balked at Viacom's insistence that the satellite service offer low-demand programming such as Nickelodeon's "Nicktoons."

The CBS deletion is a bold move for Echostar, but one that could backfire if it goes on too long. The company risks losing subscribers who may go elsewhere to find favorite programming.