By Jessica Toonkel
(Reuters) – Viacom Inc <VIAB.O>, parent of networks including MTV and Nickelodeon, launched TV ads this week urging its viewers to call customer service at cable company Spectrum ahead of a deadline that may result in a costly blackout for 16.6 million customers.
The current deal between Spectrum parent Charter Communications Inc <CHTR.O> and Viacom, expires Oct. 15. The looming deadline prompted Viacom to issue a statement on Wednesday warning of a possible disruption because distribution talks between the two companies had stalled..
The warning spooked investors, who pushed shares of Viacom down 3 percent to $24.45 in midday trading.
The negotiations with Charter come at a delicate time for Viacom, which is in the midst of a turnaround plan to improve ratings and ad revenue under CEO Bob Bakish, who took on his role last year.
Like its peers, Viacom is struggling to keep viewers as more people watch shows on smartphones and tablets. Six of the largest U.S pay TV providers posted a total of 723,000 subscriber losses during the past quarter. Of that total, Charter reported 90,000 subscriber losses.
Viacom could lose $760 million, or 16 percent, of its annual affiliate revenue, if Charter drops all 23 of its channels, said Brett Harriss, an analyst at Gabelli & Co, the second largest owner of voting shares of Viacom after Sumner Redstone.
On Wednesday night, Viacom started running ads on Nickelodeon, MTV, Comedy Central and BET, featuring talent for each network warning viewers of the possible disruption in service and urging them to call Spectrum.
The New York-based media company has also launched a site, “keepviacom.com.” Tens of thousands of viewers have called Spectrum to complain, Viacom said.
A Charter spokesman declined to comment.
Despite the high stakes for Viacom, investors seem optimistic that Charter and Viacom will reach a deal.
“Viacom has 15-20 percent of all cable viewership,” said Sal Muoio, whose firm is the 10th largest owner of controlling shares of Viacom. “You would think Charter would want them.”
Still, the dispute points to the need for Viacom to gain scale. Perhaps Viacom should revisit a merger with CBS Corp <CBS.N>, which the two explored last year, said Harriss.
In remarks last week, controlling shareholder Shari Redstone alluded to the importance of scale when asked about merging CBS and Viacom.
(Additional reporting by Anjali Athavaley; Editing by Anna Driver and Frances Kerry)