Online video key to Disney, Time Warner Cable row

Sun Aug 29, 2010 5:21pm EDT

* TW Cable, Disney talks made "significant progress"

* TW Cable wants comparable deals to Disney-Apple talks

* TW Cable balks at payment for ESPN3.com

By Yinka Adegoke and Alex Dobuzinskis

NEW YORK/LOS ANGELES, Aug 29 (Reuters) - The growing availability of popular TV shows on the Web is at the heart of ongoing contentious programming fee negotiations between Walt Disney Co (DIS.N) and Time Warner Cable Inc (TWC.N), according to a person familiar with the discussions.

If the agreements are not in place before midnight on Wednesday, millions of homes in major cities like New York and Los Angeles could see their local ABC broadcast, ESPN channels and some Disney channels go dark.

Both sides said in a statement early on Sunday they had made "significant progress" in their negotiations, but a deal is yet to be inked.

The progress was in part an agreement to cool off on a barrage of hard-hitting adverts such as Disney warning customers to switch to satellite operators DirecTV (DTV.O) and DISH Network (DISH.O) or phone company Verizon Communications (VZ.N) -- which has also ran a separate campaign.

While programming fee negotiations are always about how much the cable operator might have to pay to keep carrying the programmer's networks, these latest talks between Time Warner Cable and Disney have been further complicated by issues such as competition from online video services like Apple TV and Netflix Inc (NFLX.O) and retransmission cash fees for the ABC network.

With reports last week that Disney is in advanced talks with Apple Inc (AAPL.O) to make some of its current shows available for a rental fee of 99 cents, Time Warner Cable executives believe they should be offered comparable deals or even for free through its video-on-demand service, said the person familiar with the discussions.

Time Warner Cable has also balked at Disney's request to pay a fee for ESPN3.com, a sports website which carries some live events online but is only available to the broadband customers of its cable operator partners.

Bloomberg reported last week that Disney was looking for around 10 cents a customer each month. Time Warner Cable has 9.2 million broadband customers. ESPN3, which carried some World Cup matches earlier this summer, already has a deal in place with larger cable company Comcast Corp (CMCSA.O).

Time Warner Cable has negotiated an online programming deal before with Fox for its Speed2 channel online as part of the latest round of negotiations in December.

The discussions over retransmission fee for ABC is less at the forefront compared with previous battles with News Corp's (NWSA.O) Fox. Cable operators have become more accepting of the principle of paying to carry free-to-air broadcast signals on their cable systems.

If the talks fail it will hit Time Warner Cable homes that carry ABC in New York, Los Angeles, Raleigh, North Carolina, Houston and Toledo, Ohio. It would also hit six ESPN networks, ABC Family, Disney Channel, Disney XD and SOAPnet.

An outage would also affect homes served by closely held Bright House Networks which serves Tampa and Orlando, Florida, as well as several other smaller metropolitan areas.

Time Warner Cable negotiates some programming deals on behalf of the much smaller Bright House.

Both Disney and Time Warner Cable say privately they expect the negotiations to go to the wire as they often do, with a possibility of a last-minute deal or at least an extension in order to avoid disrupting customers' viewing.

But channels have gone dark before in recent programming fee disputes.

Earlier this year, ABC went off the air for several hours on Cablevision Systems Corp (CVC.N) only to return 12 minutes into the live Academy Awards ceremony telecast after an agreement was reached.

Both Time Warner Cable and Disney will be keen to avoid the public relations and consumer backlash that could come with a programming blackout hitting many more millions of homes than with Cablevision.

"We are committed to reaching a fair agreement so Time Warner Cable subscribers can continue to enjoy our wide array of services," said Charissa Gilmore, spokeswoman for Disney-ABC Television Group.

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