ThURSDAY AM UPDATE: Both Viacom and Time Warner Cable took their revenue battle to the brink. Less than an hour before TWC's 13.3 million subscribers were going to lose 19 Viacom channels at 12:01 AM today, the two Big Media companies came to an agreement. Here was their joint statement:

TIME WARNER CABLE, VIACOM REACH AGREEMENT IN PRINCIPLE
Networks Will Continue to Be Available On All Time Warner Cable Systems

New York, NY - Jan. 1, 2009 — Time Warner Cable (NYSE:TWC) and Viacom (NYSE: VIA and VIA.B) jointly announced this morning that they have reached an agreement in principle to renew carriage for Viacom’s MTV Networks.  The companies expect to finalize the details of the agreement over the next several days.

Glenn Britt, President and CEO of Time Warner Cable said, "We are pleased that our customers will continue to be able to watch the programming they enjoy on MTV Networks. We are sorry they had to endure a day of public disagreement as we worked through this negotiation."

Philippe Dauman, President and CEO of Viacom said, "We’ve been partners with Time Warner Cable for a long time, and we’re happy to be renewing that partnership for the benefit of their customers and our loyal viewers. It’s gratifying that we could reach an agreement that benefits not only our audiences but that is also in the best interest of both of our companies."

WEDNESDAY NOON: Viacom has rejected Time Warner Cable's request for a 15- to 30-day extension on the 12:01 AM January 1st deadline when the cable programmer pulls its 19 channels off the 2nd largest cable system operator. I'm told Viacom and TWC had no contact throughout yesterday until news of the Big Media battle broke. Suddenly, at 8 PM, TWC came to Viacom with an increase offer and the extension request. But Viacom rejected both out of hand. "It was bogus. The low-ball offer was clearly an excuse to ask for an extension and then use that in their press acrtivity today," a Viacom source claimed to me. "After we've been trying to meet with them for several weeks, we won't consider an extension unless they're prepared to really negotiate and come across with a reasonable offer." Insiders say Viacom President/CEO Philippe Dauman stayed in his office most of today waiting to hear from his TWC counterpart Glenn Britt, but the situation remains stalled. This is turning out to be Big Media brinkmanship at its most brutal with 13.3 million cable subscribers caught in the middle.

WEDNESDAY 11:30 AM: Viacom has now answered the bashing by TWC's Britt:

Time Warner Cable’s continued rhetoric and posturing is disappointing and unproductive. We have made it clear that we welcome a credible and meaningful discussion that respects our viewers and the value our programming brings to Time Warner Cable. We remain ready and willing to engage. It’s time for serious talk – before the viewers become the victims.

WEDNESDAY 10 AM: Now it's all about the PR war between these two Big Media giants. To counter Viacom's 12-hour media blitz blasting his company, Glenn Britt, President/CEO of Time Warner Cable just issued this statement about Viacom’s "threats" to pull MTV Networks from TWC customers:

Christmas is over, but Viacom is still playing Scrooge, threatening to pull its MTV Networks off of Time Warner Cable at midnight tonight unless we ask our customers to pay exorbitant price increases.

Viacom claims their demands equate to “pennies,” but that is misleading and insulting to our customers, from whom Viacom is trying to extort another $39 million annually – on top of the hundreds of millions of dollars our customers already pay to Viacom each year. That doesn’t sound like pennies to us. Demanding that our customers pay so much more for these few networks would be unreasonable in any economy, but it is particularly outrageous given the current economic conditions.

We sympathize with the fact that Viacom’s advertising business is suffering and that their networks’ ratings have largely been declining. However, we can’t abide their attempt to make up their lost revenue on the backs of Time Warner Cable customers. We’ve negotiated in good faith and made several concessions to help reach a fair and reasonable deal. We’ve asked for an extension of the current contract while we continue to negotiate. But Viacom doesn’t appear to be interested in what’s fair and reasonable for American consumers – they’re only interested in propping up their sagging bottom line, and they are poised to pull their networks from Time Warner Cable customers tonight.

Huge price increases like what Viacom is demanding threaten the ultimate value of cable TV. Time Warner Cable is a retail distributor of products we purchase wholesale. Wholesale programming costs are rising dramatically every year, and, like all multichannel distributors, we have to pass on at least a portion of the increases to our customers. Viacom’s MTV Networks are just a few of the hundreds of channels we carry. If every channel demanded huge, double-digit increases like what Viacom is trying to force our customers to pay, it would be impossible to keep the price of cable reasonable for our customers.

Time Warner Cable has reached hundreds of distribution agreements with other networks. In fact, we currently have deals with every other cable programmer. The negotiations aren’t always easy, but we work hard to reach agreements that are fair to our customers and to both businesses.

We hope Viacom won’t pull the MTV Networks from Time Warner Cable customers, and we’ll negotiate up to the last possible minute and beyond. But ultimately, it is Viacom’s decision. We implore them to join with us to reach a fair resolution or grant an extension, and we hope they won’t carry through with their threat to take their networks away from our customers tonight.

WEDNESDAY 7 AM: It appears Time Warner Cable customer service was unprepared for the onslaught of complaints from subscribers flooding into call centers. Anecdotal evidence suggests that many reps were unaware of the dispute with Viacom, which began running news crawls below its programming that 19 channels would go dark on the cable system operation at 12:01 AM on January 1st. Viacom also placed full-page advertisements in some major market newspapers today featuring protests by its media characters, including Dora the Explorer who is shown crying because she is being taken away from her fans, or SpongeBob freaking out. Viacom is even telling viewers they can get Dora or SpongeBob back by signing onto Time Warner Cable's competitors DirecTV or Verizon. Meanwhile, Time Warner Cable is prepared to refund customers for the lost programming if a deal can't be reached by New Year's, though the amount hasn’t been determined yet. (story continued after video...)

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TUESDAY: What an awful way to ring in 2009. It turns out that Viacom claims it has been trying to negotiate a "fair" renewal of its prized cable channels for months and months, but reputedly Time Warner Cable has been unresponsive and "unreasonable" so talks have stalled. The nation's 2nd largest cable system operator, in turn, claims Viacom is asking for "exorbitant" increases in carriage fees which would have to be passed along to the customer. So now this fight between the two Big Media giants will hurt cable viewers. At 12:01 AM on January 1st, just after the ball drops in Time Square, Time Warner Cable's 13.3 million subscribers will lose 19 Viacom channels -- Comedy Central; CMT: Pure Country; Logo; Palladia; MTV; MTV 2; MTV Hits; MTV Jams; MTV Tr3s; Nickelodeon; Noggin; Nick 2; Nicktoons; Spike; The N; TV Land; Vh1; Vh1 Classic; Vh1 Soul. The howling starts here, especially by parents home for the holidays with children who won't have access to their favorite shows like SpongeBob Squarepants and Dora The Explorer, and tweens/teens wanting to see new episodes of those new unreality Reality TV series The City and Bromance, and twentysomethings and older who get their news from The Daily Show With Jon Stewart or The Colbert Report.

This affects all U.S. Time Warner cable subscribers including those in New York and Los Angeles. Alex Dudley, a vice president at Time Warner Cable, the nation's second-largest cable operator, is telling reporters that the dispute with Viacom "is that they have asked for an exorbitant increase in their carriage fees and their network ratings are sagging."  However, Nickelodeon is 2008’s No. 1 basic cable network, drawing the largest audience in its history. MTV, on the other hand, has seen ratings slide. Time Warner Cable claims it's "trying to hold the line on fees for our customer" -- but it's really worried that if Viacom gets its raises, then every cable programmer will want them. TWC claims Viacom has asked for fee increases of between 22% and 36% per channel, but Sumner Redstone's company maintains the increases would cost less than $.25 a month for the package of channels per subscriber who spend a fifth of total TV time watching Viacom shows but its fees make up less than 2.5% of the Time Warner cable bill. (Sports channels are paid the biggest cable premium). But Time Warner Cable also is complaining that Viacom's popular shows are rerun on Web sites where Viacom collects advertising revenue that it does not share with Time Warner. On the other hand, Viacom has staked much of its revenue-growth prospects on squeezing higher carriage rates out of its cable and satellite affiliates despite an ad slowdown and weaker ratings.

Such negotiation battles between cable networks and cable system operators have happened before and lasted merely hours. In 2004, for example, Viacom's cable channels disappeared from EchoStar's Dish Network for two days while both sides fought over the terms of a new contract. And Time Warner blocked ABC from its cable systems in New York during a breakdown in contract negotiations with parent company Disney. So this one will either end fast or go on forever. It probably will depend on how many subscribers start flooding Time Warner Cable with obscene calls or, worse, switch to satellite. Viacom has already started a hardball campaign to "Call Time Warner Cable and say 'NO' " starring The Hills and South Park.

This is Viacom's just issued statement:

This move by Time Warner Cable to force such channels as Nickelodeon, Comedy Central and MTV off the air is another example of a cable company overreaching for profit at the expense of its viewers.

The renewal we are seeking is reasonable and modest relative to the profits TWC enjoys from our networks. We have asked for an increase of less than 25 cents per month, per subscriber, which adds up to less than a penny per day for all 19 of MTV Networks’ channels. We make this request because TWC has so greatly undervalued our channels for so long. Americans spend more than 20% of their TV viewing time watching our networks, yet our fees amount to less than 2.5% of what Time Warner generates from their average customer.

Throughout the country, we have negotiated equitable license agreement renewals, or are in the final stages of renewals, with virtually every cable and satellite carrier. Nevertheless, Time Warner Cable has dismissed our efforts at a fair compromise and has effectively chosen to deny its customers some of the most popular TV shows on the air.

As a result, we are sorry to say that for Time Warner Cable customers our networks will go dark as of 12:01 on January 1st, denying Time Warner customers shows like Dora the Explorer, SpongeBob SquarePants, The Daily Show with Jon Stewart, The Colbert Report, and The Hills.

Ultimately, however, if Nickelodeon, Comedy Central, MTV and the rest of our programming is discontinued – over less than a penny per day - we believe viewers will see this behavior by their cable company as outrageous.

Time Warner Cable subscribers who are being handed a January 1st $3 monthly increase in Raleigh, Orange County, Los Angeles, and New York City are simultaneously facing the removal of beloved shows across 19 channels.

We find it a shame that Time Warner Cable remains unreasonable at this time. We hope its leadership will have a change of heart and will seek to negotiate a fair renewal agreement.