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EchoStar, Viacom Go for the Jugular

By Alyce Lomax
March 9, 2004

That old tag line "I want my MTV" may be the battle call for customers caught in the middle of a roiling showdown between satellite television provider EchoStar Communications (Nasdaq: DISH) and network owner Viacom (NYSE: VIA). Echostar yanked off the air all Viacom stations after the two companies couldn't agree on payment hikes, and neither company looks ready to back down.

Channels that EchoStar customers won't get include such well-known TV real estate as BET, Comedy Central, MTV, Nickelodeon, and VH-1, as well as the top-rated CBS network. The markets involved are major ones, including New York, Boston, Dallas-Fort Worth, Los Angeles, and San Francisco; the move affects 1.6 million EchoStar customers who receive CBS local programming, and all 9.5 million customers who receive the national stations.

EchoStar's public statement today contained fightin' words, accusing Viacom of "holding the public airwaves hostage" by asking for 40% rate increases for its channels; it urged its customers to call Viacom and protest. It's offering a reimbursement of $1 for CBS, and $1 for the rest of the national Viacom stations, for impacted customers -- hardly the kind of discount anyone would really feel at all on their monthly statement. (Heck, it's possible many of us are already pretty disgusted with what we're paying regardless -- Rex Moore recently pointed out rate hikes across the industry.)

Viacom, on the other hand, dismisses EchoStar's move to shut down its channels with an "easy" fix for customers. The network provider is suggesting to customers just make the switch to other means of receiving its channels, which include cable providers Comcast (Nasdaq: CMCSA) or Cox Communications (NYSE: COX), satellite archrival DirecTV, owned by Hughes Electronics (NYSE: HS). (Coincidentally, Fool contributor W.D. Crotty wrote about satellite wars yesterday in regard to satellite provider Pegasus Communications (NYSE: PGTV), but who knew this gang was so ready to rumble?)

At last check, EchoStar shares were up about 2%, though they've been sagging over recent weeks as this issue -- and the deadline for negotiations -- loomed. The idea that EchoStar's customers will miss out on major channels that are pretty much ubiquitous on rival cable and satellite providers' basic packages is risky. Regardless of which company's wearing the black hat, I have a funny feeling EchoStar customers aren't feeling too sorry for either party right about now.

Do you want your MTV? Is it "lights off" at Nick at Night? Whether this impacts you or not, what do you think: Did EchoStar make the right move, or are its customers just going to be seriously put out? Talk about the issues at hand on the EchoStar Communications discussion board.

Alyce Lomax does not own shares of any of the companies mentioned. On Sunday night, a ticker about this very issue, running along the bottom of the TV screen on Comedy Central, made her wonder if it wasn't only a test of the emergency broadcast system.
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