Time Warner/Viacom

Jose A. Cruz
BUSA 202 Principles of Marketing
Eric Rios
March 1, 2012

In December 31, 28 Viacom, owners of the Nickelodeon television announce they were taking off the air 19 channels that Viacom owns including two of viewers favorite program as Dora the Explorer and Sponge Bob SquarePans. For this Warner began to receive many calls from spectators complaining and threatened that they will switch cable companies’ providers.
Time Warner is the second largest cable provider in the United State with approximately 13.3 million subscribers. Viacom is one of the largest providers of cable TV channel programming. The channel arrangement between Viacom and Time Warner is one of dual distribution in that they both offer the same product to consumers. Viacom owns the channels that people were viewing and Time Warner was supplying the consumers with those channels on another cable provider. The intermediaries are the stations that they offer the service and the people doing the negotiations to keep the channels at Time Warner and get Viacom a little more money.
The channel conflict is that of a vertical conflict, since Time Warner is below Viacom in this and Viacom has sway over what happens to them. However in this case, Time Warner was able to regain the upper hand by reaching out to its consumers, hoping they made up for what the company itself could not threaten. Therefore, Viacom wanted more money to supply the channels that had millions of viewers, and Time Warner did not want to lose any of the revenue it was making from people on their cable network Viacom argued that Time Warner should pay for programming by a 12% rate increase since Viacom’s programming constituted 7.9% of Time Warner’s costs. Viacom tried to renew their contract with Time Warner by asking Time Warner to pay $37 million per year along with the $300 million it was already paying Viacom for its programming. Time Warner argued that the rate increase could not be justified and the majority
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would have to be absorbed by customers. At the time Viacom’s programming constituted about 7.9 percent of Time Warner’s programming cost.
I would try to keep negotiating to see what works the best for all parties involved and try to find out what is working and what is not and maybe come up with a new strategy on what channels are the most viewed and enhance the features or shows on those channels. Work to keep costs at a minimum and maybe even negotiate a small hike every other year or something similar offering to make a profit off of each other’s success is a huge motivator for managers of companies to come to terms with each other once again, and work hard together because working together can lead to more profits, which in turn lead to more profits from each other.

Work Cited

Lamb, Charles W. Joseph F. Hair Jr., and Carl McDaniel. “Distribution Decisions.” Marketing. Ohio: South-Western, Cengage Learning, Print.