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Time Warner Cable - CBS blackout persists through 4th day

Mon, 08/05/2013 - 1:17pm
Brian Santo

Three million Time Warner Cable customers in New York, Los Angeles, Dallas and other cities remained without access to CBS for a fourth day, after the MSO dropped the network in an argument over the escalation of fees CBS is demanding for TWC to retransmit its signals.

Bright House Networks, long allied with Time Warner Cable, has also dropped CBS stations in central Florida markets.

CBS is trying to gain revenue from retransmission fees as a buffer against swings in advertising revenue. Although CBS sends its signal out over the airwaves for free to anyone with an antenna, about 85 percent of CBS viewers watch TV through a pay TV provider.

In response, CBS is now blocking TWC broadband subscribers from accessing CBS programs on its websites. This retaliation is said to extend to TWC broadband subscribers who get their video from DirecTV or Dish Network.

The maneuver extends the argument to a medium – broadband – that was completely unanticipated by the laws that established the framework for retransmission consent negotiations.

The American Television Alliance (ATVA) calculates that counting the CBS-Time Warner Cable blackouts, subscribers of four different pay TV providers in 52 markets have lost 75 separate TV stations. The organization believes the number of television markets now subjected to blackouts is by far a record.

Many analysts say earning revenue from pay TV subscribers is crucial to the network's growth prospects. A July 15 article in USA Today quotes Nexstar CEO Perry Sook claiming that broadcasters require higher retrans fees in order to consolidate.

UBS estimates that the blackout may be costing CBS as much as $400,000 a day.

Time Warner Cable, most other MSOs, and most analysts agree that giving in to demands for higher fees would result in skyrocketing cable bills for customers.

DirecTV came to the defense of its competitor, saying it applauded Time Warner for "fighting back against exorbitant programming cost increases."

Time Warner is trying to hold down costs as it fights to keep subscribers. In the most recent quarter, it lost 191,000 cable TV subscribers, ending with 11.7 million at the end of June.

Time Warner cut off CBS for viewers in select markets on Friday, saying the network is demanding retransmission fees that are out of line with what it pays other broadcasters. CBS said it had asked the cable provider to continue negotiating while its programming was still on the air. But it said Time Warner rejected the request.

The two New York-based companies have been taking their cases to the public, with full-page print ads.

A CBS ad on Sunday, for example, showed a TV screen with shots of the shows people wouldn't be able to watch, including "The Big Bang Theory" and "Big Brother."

"Call Time Warner Cable now," the ad urged. "Tell them you want your CBS 2 back!"

Time Warner Cable customers who turned to CBS this weekend were greeted by a message on white screen saying the network had made "outrageous demands" for fees. It advised viewers that they could still see their favorite shows through several ways, including "using an antenna to get CBS free over the air."

"We remain ready to negotiate in good faith when they are," the network in a statement Sunday.

CBS says it's never been dropped by a cable provider before and that it has successfully negotiated deals with other providers including AT&T, Cablevision, Comcast, DirecTV and Verizon.

Both companies posted healthy quarterly earnings this week. Time Warner Cable Inc. grew its net income 6 percent to $481 million, as revenue rose 3 percent to $5.55 billion. CBS Corp. grew net income 11 percent to $472 million on stronger revenue.

– The Associated Press contributed to this article

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