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CNN Today

Millions Lose Their ABC as Feud Between Time Warner and Disney Escalates

Aired May 1, 2000 - 2:09 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: Two media titans are quarreling over money, and for today, cable viewers end up the loser: 3 1/2 million homes around the country have lost their ABC stations today. Time Warner, the corporate parent of this network, says Disney pulled its ABC stations off Time Warner cable systems. Disney says it's the other way around, that Time Warner canned the stations. Either way, it left viewers with old-fashioned antennas or rabbit ears as the only way to get their local ABC station this morning.

The cities affected include the major markets of New York, Los Angeles, San Francisco, and several towns in between. In place of their talk shows and soaps today, ABC viewers on Time Warner cable systems saw a message that began -- quote -- "Disney has taken ABC away from you." Time Warner says it had no signed agreement to continue carrying the stations, but Disney blames Time Warner.

Disney says it gave Time Warner permission to carry its stations through May 24th while these contract negotiations continued. WABC executives say they are "shocked and dismayed" that Time Warner would do this to their own customers.

It's all about money, of course. Marc Smith is the editor of "Cablefax" magazine. He joins us now from Washington to help us understand all this.

Marc, a lot of finger-pointing going on. If there is a finger to be pointed, where should it be pointed?

MARC SMITH, "CABLEFAX" MAGAZINE: Well, I would have to say you should point the finger to ABC on this. Time Warner is in the case of defending their consumers from this. You're talking about a $300 million price hike over the life of the deal.

So if cable consumers want to see their rates rise, cheer for ABC and Disney.

WATERS: So what are they dealing for? What is the content at stake here?

SMITH: Well, what Disney is doing is they're using their broadcast station as leverage to gain carriage for other networks. One of them is Soapnet, which is a collection of soap operas. The other one is the Disney Channel and the third is Toon Disney. So what Disney is doing is using the leverage of their broadcast station to get advantageous carriage agreements for their other three cable networks.

WATERS: One of the questions that I have is why would ABC -- if you are correct in assessing that ABC is to blame for this, why would ABC during a May sweeps period, which determines revenues throughout the rest of the year, why would they pull their stations now?

SMITH: Well, that's exactly what they did do. What they offered was an extension to get them through sweeps week, so they would be able to get the advantage of the sweeps week and add revenues. That didn't do much for Time Warner, because what would happen after ABC got what it needed from sweeps, and then they decided to pull the plug on Time Warner.

WATERS: So is there going to be a winner here?

SMITH: Unfortunately, no. It's going to get worse before it gets better, and we can expect to see more of these types of disputes in the future. What's ironic about this is that this has been couched as a bash between two media titans. This is actually a pretty typical business dispute between cable operators and their broadcast suppliers. What's atypical about it is the size of the companies.

WATERS: Well, that is -- interesting that you should mention that, because this is being hooked up in some ways, tangentially, say, to the Time Warner-AOL deal that's pending, and some are saying, see what can happen here.

SMITH: Well, actually, that's -- that's kind of a side argument, and it's being used by ABC to put more pressure on Time Warner. I didn't hear Disney making these arguments when they wanted to buy ABC.

WATERS: So the bottom line is that there are 3 1/2 million viewers without their ABC unless they pick up these AV switches or get a satellite dish or something. Is there a scenario in which the government might get involved?

SMITH: No, actually, he FCC likes to stay out of this, because it is a private business dispute. But I think you will see perhaps some hand rattling by the government for the two parties to get this resolved. But there really is no place for them to get in on this dispute.

WATERS: There was some suggestion from a reporter in New York that says this might go on for a while. What would be your read on that?

SMITH: I think it will go on for a while. Either ABC's going -- they're going to have to make a decision on how important sweeps is to them, and if they think they can get through sweeps, I see this going on weeks upon months.

WATERS: All right, Marc Smith with "Cablefax Daily," thanks so much. SMITH: Thank you.

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