Time Warner Cable, CBS Extend Deadline as Negotiations Continue

Time Warner Cable Inc. (TWC) and CBS Corp. (CBS) have again pushed back a deadline for a new agreement to avoid blacking out shows including “Under the Dome” and “60 Minutes” for about 3 million customers.

Negotiations will continue until 8 p.m. New York time today, according to an e-mailed statement from CBS. This is the third extension in the past week between the second-largest U.S. cable provider and the New York-based entertainment company. The parties are trying to settle on a retransmission fee increase for a new long-term deal.

If the sides can’t come to an agreement, Time Warner Cable customers in New York, Los Angeles and Dallas will lose CBS and potentially Showtime programming. The New York-based cable operator said CBS was asking for retransmission fees 600 percent higher than the network’s affiliates in other markets receive for the same programming.

Retransmission fees have become a frequent sticking point in negotiations between pay-TV providers and broadcasters. CBS’s retransmission revenue jumped 62 percent in its most recently reported quarter, which ended in March, from a year earlier. Pay-TV operators will shell out more than $3 billion in the broadcast fees this year, according to data compiled by research firm SNL Kagan.

CBS is the highest-rated broadcast channel, ahead of Comcast Corp.’s NBC, Walt Disney Co.’s ABC and 21st Century Fox Inc.’s Fox. A CBS blackout would be the first time a top broadcaster has its programming dropped in New York, the largest media market, since Cablevision Systems Corp. (CVC) shut down Fox for two weeks in 2010.

Aereo Suggestion

The companies initially pushed back a decision deadline from July 23 to July 25 and then again from July 25 to today. Time Warner Cable has suggested that customers sign up with Aereo Inc. to watch CBS if a deal isn’t struck. Aereo is a startup service, backed by Barry Diller, that sells access to broadcast networks online for $8 a month without paying retransmission fees for the right to air the programming. Aereo is being sued by CBS.

Time Warner Cable has also suggested CBS could lose its channel 2 slot on the operator’s menu if a deal isn’t reached. CBS has owned that position on the broadcast dial since 1941 in New York and 1951 in Los Angeles.

When a channel is dropped from a pay-TV service, 7 percent of subscribers end up switching providers, while 16 percent watch the lost channel online, according to a survey from Park Associates, a market research firm based in Dallas. The survey, conducted in the third quarter of last year, looked at 2,500 households and asked residents what they did the last time they lost a channel in a fee dispute.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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