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Cable Technology Feature Article

July 24, 2013

CBS Blackout Looms for Time Warner Cable

By Tara Seals, TMCnet Contributor

Time Warner (News - Alert) Cable and CBS are hurtling toward a showdown over retransmission fees, which could result in a blackout for consumers in eight markets, including the key markets of New York, Dallas-Ft. Worth and Los Angeles. Cablecos almost never win in these situations, but least one analyst says that TWC should stand its ground.

TWC, the No. 2 cable operator in the U.S., said that CBS is asking for a 600-percent increase to carry its programming. "We are willing to pay for CBS, and we have offered them significant fees," Time Warner Cable spokeswoman Maureen Huff told CNN Money. "But their current demands don't represent a good value for our customers."

For its part, CBS has been running a TV ad campaign in the three critical DMAs claiming that Time Warner Cable is “threatening to hold your favorite TV shows hostage and drop CBS.” 

Image via Shutterstock

"Time Warner Cable is planning to drop the most popular programming in its entire channel lineup because it won't negotiate the same sort of deal that all other cable, satellite and telco companies have struck with CBS," the broadcaster said in a prepared statement. "CBS remains committed to working towards a mutually agreeable contract."

On Tuesday, the two companies extended the deadline to 9 a.m. on Thursday, July 25. If an arrangement can’t be negotiated, viewers in the affected markets (accounting for about three million TWC subs or 25 percent of TWC’s base) will lose CBS programming, like the new hit “Under the Dome,” as well as familiar favorites like “NCIS” and “The Big Bang (News - Alert) Theory,” along with premium cable network Showtime, the CBS Sports Network and Smithsonian Channel.  

While it would seem that CBS has leverage on its side—consumers rarely tolerate losing a broadcast channel for very long, let alone all the sports and the Showtime content—Richard Greenfield at BTIG said that there’s more to the story than meets the eye. In a research note over the weekend, the analyst pointed out that Aereo could come to TWC’s rescue.

Aereo, which offers access to free-to-air broadcast programming via the Internet for $8 per month, now covers the entire New York DMA and offers a one-month free trial, “providing Time Warner Cable subs affected by the CBS blackout with immediate access to CBS programming and a cloud-DVR to record that programming for playback across a wide range of devices,” Greenfield said. “If Time Warner Cable has an easy way to provide subscribers with access to lost CBS programming, it removes CBS’s No. 1 leverage point.” Also, Aereo is planning to launch in Dallas this year—likely ahead of CBS’s fall programming kickoff.

CBS’s content leverage is at a waning point anyway, it being the middle of the summer. The only new show that it’s airing is “Under the Dome,” which is available on Amazon Prime four days after airing. Greenfield noted that CBS Sports is a non-issue for a while too, with only the U.S. Open Tennis Championship in early September and a Sept. 22 New York Jets game impacting affected subscribers. In other words, it will be weeks before viewers really feel the pinch of losing CBS programming. And the longer TWC stands its ground, the longer it is that CBS is losing out in local ad revenue.

“While a CBS blackout would clearly be painful for Time Warner Cable, the first real pain would likely not be felt for at least 60 days, which is a long time for CBS to be dark in New York and L.A., the two largest advertising markets,” Greenfield said.

Whichever way this is settled, Greenfield said that he expects retransmission fees to rise to upwards of $2 per subscriber per month by 2020 across the five major networks (ABC, CBS, FOX, NBC and Univision), implying an annual retrans cost to pay-TV companies (and in turn, consumers) of more than $12 billion for “what is 100 percent free to anyone who chooses to use an antenna.”

Edited by Alisen Downey

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