Viacom Turns on Time Warner as Customers Cut the Cord

That is the capsule issue of the dispute between Time Warner Cable Inc. (NYSE: TWC) and content provider Viacom Inc. (NYSE: VIA), a media conglomerate that owns Spike, TV Land, Nickelodeon, and many other cable networks.

The battle line was called when Time Warner Cable, which operates in some 28 states, made available to subscribers an iPad app that allows them to view some of the cable operator’s shows -- with serious strings attached. First: You need to have a valid Time Warner account. Second: You need to be connected to the Internet via Time Warner WiFi inside your own dwelling. Meet those criteria and just maybe you can watch episodes of Auction Hunters on your iPad.

Except Viacom now has very loudly cried foul. It has filed suit against Time Warner, seeking to block the streaming to the iPad. In the suit, Viacom claims the app will cause “substantial and irreparable injury” to its business.

Time Warner, for its part, has countered that all it wishes to do is deliver content to its subscribers.
The action is unfolding in a US District Court in New York, where Time Warner has sought a “declaratory judgment.”

”We have steadfastly maintained that we have the rights to allow our customers to view this programming in their homes, over our cable systems, without artificial limits on the screens they can use to do so, and we are asking the court to confirm our view," said Marc Lawrence-Apfelbaum, general counsel of Time Warner, in a statement Thursday.

Viacom, meantime, said Time Warner’s actions were “brazen,” and it added that Time Warner was giving customers more content access "without passing along any additional costs to its customers."
One obvious fact: The iPad is only a stalking horse -- the real targets include all other tablets and, of course, all mobile phones capable of handling video content.

And the other obvious fact is that the fight is not what it seems to be.

Viacom doesn’t give a hoot about another screen. It is trying to slit Time Warner’s throat, simple as that.
At bottom, both Time Warner and Viacom are struggling for relevance in an era likely to be marked by a stampede of “cord-cutting,” as media consumers look to sever ties with the cable economy.
And Viacom apparently is eager to throw Time Warner overboard. Probably its plan is to directly stream content to viewers. The reality: It doesn’t need a cable operator anymore -- it already streams a buffet of full episodes via the Internet.

Viacom seems to be digging in for a brutal fight. It has also threatened Cablevision, another big-time cable operator, with litigation over its iPad app. (The Cablevision app, incidentally, delivers content without requiring the viewer to be on an in-house WiFi -- that is, you can be in a motel room in Bakersfield, Calif., watching an ultimate fighting match on Spike, and that’s cool as far as Cablevision goes.)
Call this that classic movie moment when one bad guy sells his former partners in crime down the river.
Pretty clearly, all the cable operators are in a situation reminiscent of what’s destroyed the business models of landline telephone companies -- and how many customers will they have by 2020? And the question on Viacom's mind seems to be whether it, too, is going down with the cable operators.

Viacom seems determined to find a way to survive, even if that means getting ugly with its longtime partners, the cable operators.

Content owners like Viacom, however, need friends -- companies that will align with them to fight off pirates (“the single biggest threat we face as an industry,” said Chris Dodd in his inaugural speech as head of the Motion Picture Association of America).

Who better for a friend than cable operators that genuinely need strong content owners?