July 24 (Bloomberg) -- Time Warner Cable Inc. is threatening to drop CBS from its position as the first broadcast station on its TV menu unless the entertainment company agrees to seek a lower fee increase for its programming.
The second-largest U.S. cable provider is talking to several competitors about taking CBS’s place, Maureen Huff, a Time Warner Cable spokeswoman, said in an interview. CBS, the highest-rated broadcast network, said it won’t give up the real estate. The slot is one of the first viewers see when they turn on a cable box and search the menu.
“CBS obviously won’t make any deals that require us to change our channel position,” Dana McClintock, a spokesman for CBS in New York, said in a phone interview.
On the broadcast dial, CBS has occupied channel 2 in New York since 1941 and in Los Angeles since 1951, according to Rich Greenfield, an analyst at BTIG LLC in New York. Both WCBS and KCBS use a CBS2 on-air logo, although Time Warner Cable would “auction off the most valuable channel real estate in the television business in the two largest advertising markets in the U.S.,” he said.
The 1992 U.S. Cable Television Consumer Protection and Competition Act set rules for broadcast stations, allowing them to guarantee carriage from cable providers as long as they didn’t demand compensation. Broadcast networks have negotiated billions of dollars in fees from pay-TV providers in recent years in exchange for their programming.
“It looks more and more likely that our customers are going to have to endure another blackout,” Huff said. “Channel 2 is CBS’s must-carry position. But when they elect retransmission consent, they no longer have any right to any particular position on our lineup.”
Time Warner Cable was unchanged at $117.29 at the close in New York, up 21 percent this year. CBS was little changed at $52.48 and is up 38 percent.
The threat by New York-based Time Warner Cable is an attempt to put pressure on CBS to lower the amount of money it wants for giving access to its owned-and-operated affiliate networks in New York, Los Angeles and Dallas. Time Warner Cable claims New York-based CBS asked for prices 600 percent higher than the network’s affiliates in other markets receive for the same programming.
About 3 million Time Warner Cable subscribers would lose CBS if a blackout occurs. Time Warner Cable has about 12 million total video subscribers.
The Wall Street Journal reported Time Warner Cable’s threat over the Channel 2 slot earlier today.
“Even if we were to go dark with CBS, we would still work toward an agreement,” Huff said. “But CBS could potentially appear on a different channel number when we reached an agreement.”
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