Business - Viacom and Time Warner reach deal to avoid blackout

NEW YORK (Reuters) – Viacom and Time Warner Cable reached an agreement in principle on Thursday that avoided a blackout that would have prevented more than 13 million U.S. subscribers from seeing popular TV shows like "Dora the Explorer" and "The Daily Show with Jon Stewart."

The two sides said in a statement they expected to finalize details of the agreement over the next several days. Viacom wanted Time Warner Cable to pay an extra $35 million to $40 million a year for carrying its cable channels, including MTV, Comedy Central and Nickelodeon.

Time Warner had refused, saying the economic climate made it impossible to pass along such costs to its customers. Viacom had originally denied Time Warner's request for an extension of the previous terms to allow talks to continue and had threatened to pull its TV networks from Time Warner unless a deal was reached.

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

Viacom CEO Philippe Dauman said, "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."

Both companies spent most of Wednesday exchanging angry words via the media, including a high-profile advertising campaign by Viacom in papers like The New York Times.

Affiliate fees have become even more important as the recession has cut back advertising revenue.

Neither side was well-positioned for a long standoff. Time Warner Cable is about to lose the protection of parent company Time Warner Inc with a planned split off in early 2009. It is extremely reluctant to risk losing subscribers by raising its prices or due to the absence of popular cable shows.

Viacom, which makes about 30 percent of its revenue from advertising, has come under scrutiny as its controlling shareholder, mogul Sumner Redstone, faces his own debt crunch and has been forced to sell Viacom stock to cope with the problem.

(Reporting by Paul Thomasch and Yinka Adegoke; Editing by Peter Cooney)