CBS, Time Warner Cable Spat Will End By Football Season, Analysts Say

By NFL opening day, Time Warner Cable will be under "unbelievable pressure" to settle, said one influential Wall Street analyst

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Gary Hershorn / Reuters

Aereo picks up free over-the-air TV signals broadcast from the Empire State Building.

The public war of words between CBS and Time Warner Cable continued Thursday even as the two companies resumed private negotiations to resolve the blackout that has infuriated consumers from New York City to Los Angeles. For a seventh day, CBS, the highest-rated broadcast network in the country, remained dark for more than 3 million consumers, following Time Warner Cable’s decision to drop the channel after the two sides failed to agree on terms to settle their retransmission consent fee dispute. Cable and satellite companies pay these fees to broadcasters for the right to carry their channels.

CBS wants more money from Time Warner Cable for the right to broadcast its flagship network. The cable giant has thus far refused. In the latest round of bickering designed to gain the upper hand in the court of public opinion, the two sides exchanged angry charges accusing each other of trying to hamper the development of online services like Netflix, Amazon and Hulu. In response to Time Warner Cable’s decision to yank CBS, the broadcaster blocked online access to its shows for the cable giant’s subscribers. (Time Warner Cable was spun off as an independent public company from TIME parent Time Warner in 2009.)

On Thursday, the two companies sent top executives to square off at a New York City Council hearing. “This latest negotiation with Time Warner Cable has gone badly off course,” said Martin Franks, an executive vice president at CBS. Franks, who’s been involved in negotiating every CBS retransmission deal since 2000, said that since 2006, when CBS became a standalone company, the media giant has negotiated over 100 retransmission consent agreements “without even a hint of public discord, much less having our channels dropped…until now.” CBS earned $3.65 billion in profit over the last 12 months.

“We also realize that not everyone affected by this dispute can resort to an antenna to watch our broadcasts beaming for free from the top of the Empire State Building, or switch to Verizon FiOS, DirecTV, RCN or other providers,” Franks added. CBS is reportedly asking for an increase from Time Warner Cable of about 100% per subscriber, from $1 to $2 per month. (By comparison, ESPN commands more than $5 per subscriber, according to industry estimates.)

(MORECBS, Time Warner Cable Blackout Drags On as Consumers Fume)

For its part, Time Warner Cable, which was represented by Rory Whelan, regional vice president for government relations, insisted that it is “eager to resolve this dispute,” but accused CBS of engaging in “outrageous, punitive conduct by blocking TWC’s Internet access subscribers nationwide from viewing CBS programming online.” Whelan added: “Such blocking is akin to yanking television antennas off our customers’ rooftops to make certain they cannot access CBS programming over the air.” Time Warner Cable earned $7.65 billion in profit over the last 12 months.

In interviews this week, Wall Street analysts and industry experts told TIME that neither side has much of an incentive to back down at the moment, because CBS is still weeks away from the debut of its new fall primetime season — which includes hits like “NCIS” and “The Big Bang Theory” — as well as NFL football, including New York Jets games. Rich Greenfield, a media analyst at BTIG, said that the two sides wouldn’t risk the fury of viewers if NFL games are blacked out.

For now, the financial impact on the two billion-dollar companies appears limited. John Janedis, Managing Director at UBS Equity Research, believes that the financial impact on CBS — which reported revenue of $3.7 billion last quarter – is likely to be minimal. “Based on our estimates, we think the CBS Network going dark could cost CBS about $400,000 per day, including lost retransmission revenue and a loss of advertising dollars at both the network and the stations,” Janedis wrote in a note to clients.

For Time Warner Cable, the financial consequences of the dispute could be more severe, especially if customers get angry enough to ditch their subscriptions, according to Craig Moffett, senior research analyst at Moffett Research. “The real cost to Time Warner Cable will be if and when they lose subscribers,” Moffett told TIME. “Retransmission disputes are about who feels the most pain. Broadcasters feel it immediately in the form of lost advertising revenue. The pain for cable operators is felt more slowly, but could end up being worse in the long run if customers leave.”

(MORECBS Calls Time Warner Cable Proposal a ‘Sham’ — and Blackout Continues)

For now, Moffett expects few Time Warner Cable subscribers to bolt, because consumers have gotten used to these disputes getting resolved in a matter of weeks. “I wouldn’t expect an exodus this time of year, because customers know that these disputes typically don’t last very long,” Moffett said. “Customers tend to procrastinate, and by the time they get around to switching, the dispute will be over.”

Earlier in the week, CBS blasted a proposal from Time Warner Cable to resolve the ongoing CBS blackout in the nation’s top media markets as a “sham.” In a letter to CBS chief Les Moonves, Time Warner Cable CEO Glenn Britt proposed that CBS could return to Time Warner Cable customers on an a la carte basis, which would mean that individual cable subscribers could choose to buy CBS programming for an additional cost on top of their normal cable package fees.

In response, CBS accused Time Warner Cable of bluffing, calling the proposal a sham “designed to distract from the fact that Time Warner Cable is not negotiating in good faith.” Giving consumers the ability to pick and choose channels would undermine the entire cable industry business model, which is based on selling bundles of channels to subscribers. “In short, this was an empty gesture from a company that is expert at them,” CBS said. Echoing that position in comments on Thursday, 21st Century Fox president Chase Carey called cable a la carte pricing “a fantasy.”

One key test of viewer sentiment will come this Sunday, when CBS broadcasts the PGA golf championships, which will be blacked out to Time Warner Cable customers if there is no resolution to the dispute. “The PGA championships will provide a little bit of pressure but probably not enough to force a deal,” said Moffett. “So this could drag on until football season starts. By opening day, Time Warner Cable will be under unbelievable pressure to settle, and it’s hard to imagine that they will have the fortitude to continue holding out.”

14 comments
MaxPower1
MaxPower1

If you live in the Metro New York area you can still watch CBS shows  Sports.

www.allgse.com has many tips and they don't lead to piracy

RichRube67
RichRube67

Hey TWC. You have sucked more and more money out of consumers for years now so you better start paying something back rather than ruining the regularly scheduled TV programming that consumers have developed because of this current blackout. You lure new customers in with phenomenal deals that last a couple of years and then every year after that make it more and more difficult for people to want to stay with you because annual rate increases are often budget blasters. I have personally gone from a $150 bundle fee that lasted from 2006 to 2008 to a rate now that is almost 75% higher, and now my wife and I have missed the last two episodes of two Showtime series we watch (Dexter and Ray Donovan) because of your greed. Start thinking about your customers instead of your damn bottom line...one that already is far too big and doesn't need to get any bigger.

Randall_Lind
Randall_Lind

I think TWC should just drop CBS for good 100% increase is crazy. How can CBS in good faith ask for an 100% increase? No one is going to pay for channels they can watch for free over air unless they are stupid.

Upset@TWC
Upset@TWC

I think that TWC is not playing fair with it's customers. We should all put our monthly payments into an escrow account and not allow TWC have access until we get CBS back.

Is it time to bring back Government Regulation? 

areukidding
areukidding like.author.displayName 1 Like

I'm more mad at CBS than the system I'm on they use local channels that we should get free for anything we want to see. For me don't care what programing CBS has good,bad,or indifferent. I will NOT watch any CBS programs anymore no matter what the outcome. If more people did that they would not have the money grabbing attitude they now have. the best advice I saw here was to have no commericals I would gladly spend more money for that!!! 

logonlon1
logonlon1

I am pissed because I am missing Dexter. Raise my Showtime 2 bucks a month. I do not care. 

Terijr
Terijr like.author.displayName 1 Like

I think this whole mess is a bunch of crap. Big-wigs fighting like children and the only ones paying the price is US... the consumers. I happen to live in a apartment complex and the ONLY cable/tv network available to me is TimeWarner. Otherwise, I'd be using something else. Now, I am blocked from the majority of the shows that I watch to begin with and I have no options because these 2 giants; one has blocked me from my television and the other from my internet options. It's garbage and it makes me sick. Settle the blamed dispute.. you're going to up our rates either way!

messy1
messy1 like.author.displayName like.author.displayName like.author.displayName 3 Like

If CBS wants more money from Time Warner Cable, fine. But in return, they should have all the commercials cut out.

logonlon1
logonlon1

@messy1 What really pisses me off Messy is when you go to a movie and they have the chutzpah to show about 10 coming attractions when movie should start , plus other ads. The customer gets little respect. When you pay 12 bucks a movie ticket you should not be subjected to commercials or coming attractions at start time. 

mch4me
mch4me

I love Time Warner they keep using Verizon as some kind of alternate choice Verizon sucks Time Warner Cable has outstanding customer service and the other companies are just haters because Time Warner owns all the networking Verizon should stay out of it!!!!!!

Amp88fan09
Amp88fan09 like.author.displayName like.author.displayName like.author.displayName 3 Like

I have to laugh at the continued comments that Time Warner Cable viewers will miss Sunday's PGA championship, for those of you that want to watch it, it will be on TNT. I think CBS is trying to strong arm TWC viewers into paying for their greed. Perfect example of CBS not caring for the viewer is how they're blocking TWC internet users from being able to watch online. If they did care for the viewer then this wouldn't be blocked. I really hope advertisers get smart and pull their funding to this crook of a broadcaster and make them feel the pain this station is dealing to viewers!

jamesjimcie
jamesjimcie like.author.displayName like.author.displayName 2 Like

Every Time Warner Cable customer should be ashamed of CBS and all of their head executives including Leslie Moonves for this blackout that result in the viewers from being able to watch their favorite shows with Time Warner Cable.

This is an excuse for CBS and all of their head executives including Leslie Moonves wanting to try to be way too big being the Wal-Mart’s, the Marlboro's, the Joe Camel's, the Paramount Pictures with the movie theater chain of the 1940's, the Morris Levy's when he was part of Roulette Records, the Clive Davis’s when he was at Columbia Records in the 1970′s, the Neil Bogart’s of Casablanca Records fame of the 1970′s disco era, the Trinity Broadcasting Network’s, the David Smith (one of the Smith brothers from Sinclair Broadcast Group), the Perry Sock and the Nexstar Broadcasting Group, the Harry Pappas as part of the Pappas Telecasting Companies, the Bernard Madoff’s, the Enron’s, the Worldcom’s, the Adelphia’s, the Tyco’s, the Martha Stewart’s, the Jill Kelley’s, the Orie sister's, the Teresa and Joe Giudice's, and the Jesse Jackson Jr's, of the 2000′s by letting broadcast greed get out of control so all of the head employees and bosses including Leslie Moonves at CBS to be able to enjoy carefree lavishly spending to support carefree lavishly lifestyles with luxurious homes, luxurious jets, luxurious cars, luxurious furs, luxurious jewelry, join luxurious clubs, go to luxurious hotels, go to luxurious casinos to do gambling, go to horse races, throw luxurious parties, and have other luxurious items just to make them very happy then trying and willingness to improve the quality of all the stations they owned and control and making the viewers happy as well. I hope and I wish that CBS and all of their head executives including Leslie Moonvesget scolded by both by the ACA and the FCC for making the viewers being forced to deal with this blackout because they could not make a deal to get the stations back to it’s customers sooner and with a fair deal with Time Warner Cable. I hope and I wish that CBS and all of their head executives including Leslie Moonves is barred from continuance of ownership of it's owned and operated stations and buying and owning anymore TV stations in the future after their final decision to remove the stations from Time Warner Cable. I feel that CBS and all of their head executives including Leslie Moonves are trying to bribe like the General Tire/RKO General of the 1960′s and 1970′s by not being very honest of not only the viewers by making them miss the shows on Time Warner Cable and also on themselves with the force of demanding Time Warner Cable to pay up in the retransmission consent to continue to carry the stations.

I hope and I wish that the FCC would force CBS and all of their head executives including Leslie Moonves to allow Time Warner Cable to carry it’s stations without any interference, in the event CBS and all of their head executives including Leslie Moonves fails to allow Time Warner Cable to carry it’s stations again, then the FCC would force CBS and all of their head executives including Leslie Moonves to allow Time Warner Cable to import out of market stations that are very real close to the station being blacked out being affiliated with the same network, in the event CBS and all of their head executives including Leslie Moonves fails to allow Time Warner Cable to import out of market stations that are very real close to the station being blacked out being affiliated with the same network, then the FCC would allow Time Warner Cable to carry the out of market station with the same affiliation without any restrictions and also be allowed to continue to carry the out of market station that it’s digital television signal is reachable by a outdoor antenna including both it’s SD and HD feeds on the Time Warner Cable service system even after the dispute is over without any interference for 12 whole years to meet FCC rules and regulators.

This is an excuse for CBS and all of their head executives including Leslie Moonves wanting to be too big being way too busy trying to act like the Baauer's, the PSY's, the Carly Rae Jepsen's, the Tay Allyn's, the Nicole Westbrook's, the Rebecca Black's, the Double Take's, and the Guns N Roses Axl Rose as well as trying to be the Conrad Murray's, the Jerry Sandusky's as the assaulters, the Jodi Arias's, the Casey Anthony's, the Charles Starkweather's, the Charles Manson's, the Lyle and Erik Menendez's, the O. J. Simpson's, the Scott Peterson's, and the Drew Peterson'sas the greedy murderers, the Alfonzo Dennard's, the Jeremy Dobbe's, the Jeffrey Ireland's, the Amanda Bynes's and the Lindsay Lohan's as the drunk and the drug abusers, the Rodney Dangerfield's, the John Belushi's, and the Chris Farley's as the comedians, (all real life people) the Gordon Gekko's, the Victoria Grayson's, the Victor Newman’s/the Jack Abbott's, the J. R. Ewing's/the Cliff Barnes's, the Charles Montgomery Burn's/ the Mayor Quimby's, the Homer and Bart Simpson’s, the Peter Griffin’s, the Mickey Mouse's/the Minnie Mouse's, the Bugs Bunny's/the Daffy Duck's/the Porky Pig's, the Garfield cat's, the Cookie Monster's, the Miss Piggy’s, and the Pillsbury Doughboy's, (all fictional characters) of the broadcasting industry of not coming to reach a deal with Time Warner Cable to carry it’s stations to the viewers with Time Warner Cable everyday.

This is an excuse for CBS and all of their head executives including Leslie Moonves trying to turn into the 1919 Chicago White Sox’s baseball team and the Southern Methodist University football team of the 1980′s to force Time Warner Cable to accept a take it or leave it deal to carry it’s stations. I urge all of the viewers with Time Warner Cable to boycott CBS and all of their head executives including Leslie Moonves right now for making the Time Warner Cable viewers suffer from being able to watch their favorite shows in a big huge ugly game of baw baw baw baw baw baw baw baw baw baw baw baw chicken.

I also encourage all Time Warner Cable customers to boycott all the big head executives at Time Warner Cable including Glenn Britt and Robert Marcus.

TimKarr
TimKarr like.author.displayName 1 Like

I wonder why the 21st Century Fox president thinks that a la carte -- a common-sense,  consumer-friendly solution to this problem -- is "a fantasy." Sens. McCain and Blumenthal have introduced a bipartisan bill that would help make this option a reality for millions of cable customers. Is it a fantasy because the industry and its lobbyists are in lock-step against any idea that frees viewers from paying so much for stations we never watch?