Millions of AT&T Inc.'s U-verse video customers lost access to the Food Network and HGTV after it couldn't reach a deal with Scripps Networks Interactive Inc. over distribution fees.
AT&T pinned the blame on Scripps, saying in a statement Friday that the programming provider "won't provide a fair deal for AT&T customers" and is "punishing viewers for leverage in programming negotiations."
But Scripps Networks, which also owns the Cooking Channel and DIY Network, claims Dallas-based AT&T refused an extension of the contract, which expired early Friday.
AT&T had 2.7 million U-verse subscribers at the end of the third quarter. The company said U-verse is available to more than a million households in the Chicago area.
Tribune Co., parent company of the Chicago Tribune, owns a stake in the Food Network and Cooking Channel.
The number of programming blackouts this year between content owners and distributors has escalated to the highest level in at least a decade. TV providers, like AT&T, are trying to stem rising programming costs, which are typically passed on to consumers, in a weak economic environment. Programmers are trying to maximize their distribution and content fees.
AT&T said Scripps is demanding it pay more than double what its competitors pay for the same programming.
Scripps denies the claim, saying the "impasse is not about money" and that the two parties came to an agreement in principle before their deadline.
"We are shocked and disappointed that AT&T would rather deprive its customers of fan favorites" than "continue to negotiate in good faith," Scripps said in a statement Friday.
The president of the Food Network also expressed disappointment over Friday's developments.
"This came out of left field," Brooke Johnson told the Tribune. "We had reached an agreement on economics," she said, referring to the fees that U-verse would pay to air the channels on television and as part of its video-on-demand service.
Scripps said it had asked for more time to negotiate the use of video in new media.
"We mutually agreed on two (negotiation) extensions, and we had offered to even extend the previous terms until the end of the year," Johnson said.
The problem, Johnson said, is that Scripps did not want to sign away rights to its programming on various non-TV platforms without specifics from U-verse.
"They are asking for broad, unlimited distribution on nonlinear platforms that go well beyond emerging media technologies," Johnson said.
A spokesman for AT&T declined to comment further, referring the Tribune to its earlier statement: "We've been working for weeks to reach a fair deal, but they didn't hold up to what had been agreed upon verbally, leaving us without the rights to offer these channels.
"We apologize to our customers who've been affected by this. We want to keep these channels on, at a fair price for you."
Increased use of video on the Web and mobile platforms represents new territory for programmers like Scripps and providers like U-verse. While Internet video services like Hulu and Netflix Streaming have wide popularity, their offerings are typically not comprehensive.
As for where this leaves consumers, Johnson said, "Our request is to turn on (the channels) and go back to the negotiating table."