Time Warner Cable Inc. Chief Executive Officer Glenn Britt said CBS Corp. has been “uncompromising” in their negotiations to agree on new terms for program rights and in a statement yesterday called for them to return to talks.
Time Warner Cable cut off CBS broadcasts and pay TV-channels in New York, Los Angeles, Dallas and several other markets. More than 3 million Time Warner Cable subscribers will be without shows such as “60 Minutes” and local CBS news, the New York-based network said Aug. 2 in an e-mailed statement. It was the first time CBS has been dropped by a cable system, the broadcaster said.
The companies failed to settle on how much Time Warner Cable would pay for retransmission rights to CBS shows. The second-largest U.S. cable company said CBS was asking for fees that were 600 percent higher than the network’s affiliates in other markets. Britt has been a critic of rising program costs.
“If there was ever a retrans battle for the distributor to fight, this is the one,” said Rich Greenfield, an analyst with BTIG LLC in New York. “This is a unique opportunity to push back for the subscribers.”
In addition to CBS broadcasts, Time Warner Cable was also blacking out the Showtime and TMC premium channels, Flix and Smithsonian, according to the pay-TV provider.
The two companies had extended their negotiating deadline several times, most recently to Aug. 2 at 5 p.m. New York time, when the blackout started.
Programming in some areas was temporarily blocked on July 30 and restored about 30 minutes later after the companies agreed to keep talking.
The blackout is the first of a top broadcaster by a major pay-TV carrier in New York, the largest U.S. TV market, since Cablevision Systems Corp. shut down Fox for two weeks in 2010.
“We agreed to an extension on Tuesday morning with the expectation that we would engage in a meaningful negotiation with CBS,” Time Warner Cable said in a statement. “Since then, CBS has refused to have a productive discussion.”
Time Warner Cable’s negotiating leverage is strongest now, because CBS has few new programs or professional football on the air, Greenfield said. The network is probably seeking “a couple bucks” a month per subscriber from Time Warner Cable, he said.
“CBS wants to be paid like a cable network,” Greenfield said. “Yet you don’t see ESPN putting their content over the air for free or on the Internet for free. They were looking for a big step up from Time Warner Cable.”
CBS is the most-watched television network, ahead of Comcast Corp.’s NBC, Walt Disney Co.’s ABC and 21st Century Fox Inc.’s Fox.
Time Warner Cable, based in New York, has encouraged customers to sign up with Aereo Inc. to watch CBS. Aereo is a startup service, backed by Barry Diller, that sells access to the broadcast networks online for $8 a month without paying retransmission fees for the right to air the programming. Aereo is currently being sued by New York-based CBS.
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 Parks 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.
The dispute between the companies focused on retransmission fees, which have become a frequent sticking point in negotiations between pay-TV providers and broadcasters that historically provided their signals for free.
Pay-TV operators will spend more than $3 billion in retransmission fees this year, according to data compiled by research firm SNL Kagan.
In a statement, CBS said viewers would miss coverage of the Bridgestone Invitational golf tournament this weekend featuring Tiger Woods. Without an agreement, Time Warner Cable subscribers also won’t get the golf’s final major tournament of 2013, the PGA Championship, starting Aug. 8, CBS said.
CBS, controlled by Sumner Redstone, fell 0.6 percent to $54.53 Aug. 2 in New York. The stock reached its highest in 13 years on Aug. 1 after the company reported an 11 percent increase in second-quarter profit, led by rising fees from pay TV systems like Time Warner Cable.
Time Warner Cable, with about 12 million video customers, declined 0.5 percent to $117.10. The stock is up 20 percent this year.