(Adds Charter declined to comment, detail from analyst note)
By Jessica Toonkel
Oct 18 (Reuters) - Viacom Inc and Charter Communications Inc have agreed to a distribution deal that puts eight of Viacom's most popular networks in Charter's cheapest U.S. cable bundle, a source told Reuters on Wednesday.
Under the deal, which has not been finalized, five of Viacom's six flagship networks - MTV, Nickelodeon, Comedy Central, Paramount Network and BET - would be in the basic package of Charter's Spectrum cable service, according to the source, who wished to remain anonymous because the discussions are confidential.
The other three channels included would be VH1, TV Land and CMT.
Viacom and Charter declined to comment.
Having its most popular networks in the least expensive cable bundle on Spectrum means more audience and revenue for Viacom, which like its peers, is struggling to keep viewers as people increasingly watch shows on smartphones and tablets.
Viacom's other networks, including flagship channel Nick Jr., would be in the more expensive Spectrum packages.
Charter and Viacom agreed in principle on Tuesday night to the deal, which would see Viacom's networks remaining accessible to 16.6 million households.
Viacom Chief Executive Bob Bakish, who took on the role last year, has made improving relations with distributors a key part of his turnaround strategy for the company.
Six of the largest U.S. pay-TV providers lost a total of 723,000 subscribers during the second quarter, including 90,000 subscribers leaving Charter.
An agreement between the two companies would be "mutually beneficial," wrote Evercore ISI in a note on Sunday.
Having Viacom content helps Charter add video subscribers at a time of increasing competition from virtual streaming services like Hulu and DirecTV Now, while Viacom is still heavily dependent on cable and satellite companies for distribution, according to Evercore ISI.
For Viacom, the agreement "eliminates a significant overhang" to Viacom's stock, JPMorgan wrote in a note Tuesday night.
Reporting by Jessica Toonkel in New York; Editing by Rosalba O'Brien and Lisa Shumaker