NEW YORK -- The ABC television network went dark on Time Warner Cable systems in New York, Philadelphia and Raleigh-Durham, N.C., early on Monday morning as talks between the network's parent company, the Walt Disney Co., and the cable company broke down.
As clocks struck 12:01 a.m., when an agreement that allows the cable company to carry the stations ran out, Time Warner began blocking the signals of ABC stations, including WABC-TV in New York. Ultimately a total of 3.5 million households that subscribe to Time Warner in markets including Houston, Los Angeles and suburban Milwaukee were expected to be affected.The failed talks meant that Time Warner customers had to disconnect their cable boxes and use standard TV antennas to get ABC programming.
Negotiators said the stations' signals would not be returned to the cable systems unless the two sides could come to an agreement. Barring that, it was possible that Federal Communications Commission could help resolve the matter, at least temporarily.
Each side was quick to blame the other for the removal of the ABC stations. Each said the other had disregarded federal regulations and proved unyielding in the negotiations, which began late last year.
At issue is an expired agreement that had allowed Time Warner to transmit the signal of seven Disney-owned, ABC TV stations, over its cable systems. That agreement ran out in late December, and the two sides have agreed to one-month extensions ever since as the two sides hash out how much Time Warner will pay Disney for its cable channels. The last extension expired at midnight.
Robert A. Iger, the Walt Disney president, said that with Disney permitting transmission of the station's signals through May 24, Time Warner was bound to carry them.
"This is thoroughly outrageous," he said. "We gave Time Warner total, complete and unqualified authorization to carry our broadcast signals, and they chose not to do so."
For its part, Time Warner at midnight began running a headline that said "Disney Has Taken ABC Away From You."
Time Warner promised to attempt to resolve the situation as soon as possible.
The talks have also highlighted some of the complex issues facing players in the emerging new media universe, which could be dominated by AOL Time Warner when that merger is completed.
The dispute began late last year when Disney asked for several concessions from Time Warner in return for allowing Time Warner to continue carrying seven of its ABC stations. Disney has demanded that Time Warner cable systems not only feature its new channels -- Toon Disney and the Soap Channel -- but also make the Disney Channel part of the basic service packages, and Time Warner says the company has asked for as much as $300 million for the right to carry the channels. Time Warner has agreed to Disney's demands regarding the channels, but it has balked at the amount of money it says Disney is seeking.
As negotiations continued, executives said, Disney also raised concerns that a merged AOL Time Warner would have too much power in the coming age of interactive television, in which consumers will be offered more channels and the opportunity to purchase goods through their television sets.
Preston Padden, Disney's Washington lobbyist, who is advising the company's negotiators, said Disney feared that Time Warner would hinder other entertainment companies from offering interactive programming over its cable lines while promoting its own.
For instance, he said, when the proper technology is in place, ABC could conceivably enable viewers of its local and national newscasts to press a button on their remote controls and have more information delivered to their TV screens. To do so would require two-way communication along cable or phone lines. Padden said Disney worries that Time Warner would block that feature from ABC newscasts while promoting a similar one on CNN, which it owns.
Similarly, he said, there are concerns that Time Warner's on-screen programming guides will promote Time Warner's programming over offerings from other companies. Time Warner could also block channels it does not own from offering sponsors the opportunity to create interactive advertisements, he said. "We said, 'Please commit to us that you will treat our channels no differently than you treat the channels that you own,"' Padden said.
Throughout the negotiations, Time Warner representatives have called Disney's demand too broad for discussion. "What company would negotiate away those kinds of commercial rights for businesses that don't even exist yet?" said Mike Luftman, a spokesman.
Time Warner also said Disney was demanding high fees because it calculated that Time Warner could not afford to lose the right to broadcast ABC. Losing ABC's signal now would anger Time Warner customers, who might decide to switch to satellite television to get the channels. (In Houston, Disney gave out 18,000 free satellite dishes in in an attempt to put more pressure on Time Warner.)
Disney executives do not deny that they are asking for concessions from Time Warner that they might not have been able to win if a new broadcasting agreement were already in place. But they want to set terms for their relationship with Time Warner before its merger with America Online receives government approval and it becomes even more powerful.
Disney had agreed to grant Time Warner permission to retransmit ABC programming through May 24, the end of the crucial ratings sweeps period, in which broadcasters gauge audience levels in order to set advertising rates. Time Warner has refused to accept that extension, demanding instead an eight-month postponement of the deadline, which would come well after the expected close of the Time Warner-America Online merger.