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ECHOSTAR OUT OF VIACOM’S ORBIT

Contract Dispute Results in Company’s Dish Network Dropping CBS and Cable Programming
An ugly battle between Dish Network operator EchoStar and CBS/MTV Networks owner Viacom has resulted in CBS and MTVN channels being dropped from the Dish satellite TV system.

Recalling a similar battle four years ago when Time Warner dropped Disney’s ABC network from its cable systems for a day, EchoStar and Viacom have been unable to reach a new agreement for Dish to carry CBS and MTVN programming. At issue are Viacom’s demands for more money and insistence that EchoStar agree to carry additional channels.

“DISH Network sincerely regrets that all MTV, BET, Comedy Central, Nickelodeon and VH1 programming is currently unavailable. Viacom-owned CBS stations are also unavailable at this time,” a Dish Network Website post to its over 9 million subscribers says. “These channels and CBS stations, owned by Viacom, have proposed excessive rate increases which we feel are unreasonable. Viacom is demanding rate increases nearly four times the rate of inflation for various cable channels, amounting to hundreds of millions of dollars in fees that would increase the cost of our services to you.”

For its part, Viacom says EchoStar is distorting the situation and that Viacom is asking for only a modest rate increase in addition to exercising its market power in bundling new channels into its proposed new deal with the satellite operator.

Yesterday, EchoStar Chairman Charlie Ergen said a deal could be reached with Viacom soon, despite having characterized Viacom’s demands as amounting to extortion. Disney President Robert Iger tells the Wall Street Journal that it’s unlikely EchoStar will be able to hold out long. Citing the Time Warner/ABC impasse, he said, “The pressure on them was so great they folded in a day—one day. That's from consumers, politicians, investors, you name it. Dish is going to see a similar reaction."

Separately, Viacom Chairman Sumner Redstone suggested Monday at an investor conference that Viacom may explore the idea of buying distribution, such as a cable system. Company President Mel Karmazin has previously insisted there was no reason for Viacom to own distribution.
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