Time Warner Cable Drops CBS in Three Cities

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Aug. 2 (Bloomberg) -- Time Warner Cable cut off CBS broadcasts in New York, Los Angeles, Dallas and several other markets after the companies failed to renew their distribution deal. Standard & Poor's Tuna Amobi and Bloomberg's Edmund Lee speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

No more "big bang theory here co.

No more "the good wife." consolidation in the cable industry and a battle over fees.

Cbs is being blacked out for some time warner cable subscribers in new york, los angeles and dallas.

This is a fight over cable fees once again.

Cbs says that time warner has dropped cbs programming in new york among los angeles and dallas.

Let's find out what is going on.

I want to bring in edmond lee and an analyst at standard & poor's who covers the industry.

Edmund, this has just been happening.

What is the dispute between time warner and cbs?

Cbs wants more money for time warner cable to pick up its signal for new york among los angeles, dallas.

Time warner is willing to pay more, but just a reasonable amount, and that is what the disagreement is over.

What is a reasonable fee?

The average is $.66 per subscriber per month.

Time warner is asking for something below that, and cbs is asking for something more.

This is simple economics.

Cbs its transmission consent from the pay-tv operators.

Either side is pushing for favorable terms.

For time warner cable, programming cost are pressuring the industry across the board.

For cbs, this is almost like found money.

Where this revenue stream did not even exist three years ago, you are getting hundreds of millions of dollars dropping almost to the bottom line.

A lot of investors are really waiting for a resolution.

Edmund, if you actually go to this ebs channel on a time -- to the cbs channel on a time warner cable system, there is a lengthy description and and report from time warner cable basically saying that cbs has made unreasonable demands.

Is there any way to judge , i mean, unreasonable means you are comparing it to something else.

Is there any way to compare?

We really do not know what the discrepancy is about right now.

We know it comes down to numbers.

What makes this negation nation -- what makes this negotiation differences is that cbs has hit programs.

At the same time, they are not like fox or nbc that are part of larger cable networks that bundle price into negotiations.

Is cbs able to just sit and wait for a little bit because they have all these hit programs, whether it is "csi," or the new "under the dome?" it used to be that cbs and content providers would be in the drivers the to in a situation like this am of the things have changed in the landscape.

You have a whole lot of other options, over the air, antenna, internet.

There are no football games or sporting events that are going to push time warner cable to make a deal.

Frankly, in all of the years i have covered the industry, i have never seen a situation has so many deadline next tensions and yet the parties are unable to hamill -- hammer out a deal.

It shows you how tough the talks have become.

It is not just time warner dropping the signal from dallas, new york and los angeles, but charter communications may be combining with cox communications, the privately held cable company.

That speaks to the consolidation in the cable industry.

Heart of the reason for that, the cable companies -- part of the reason for that, the cable companies, the bigger they are, the more leverage they have in the negotiating room.

The more subscribers they bring to the table, the better argument they have.

To content providers really need cable to distribute their product anymore?

You can get around this on the internet.

There is a very specific company that time warner cable is saying you can go to to watch cbs, area.

They pick up the signal and put it on the internet and do not pay retransmission fees.

The irony is, once i was out there, les medvedev said we might pull off the airwaves and go to cable.

The cable guys would love that, he said.

What i see now is almost like a perfect storm that will in fact kind of motivate further further industry consolidation.

If you rewind to several years ago , the argument for consolidation used to be to get exposure to other areas of the value chain, vertical integration.

What you are seeing now is the theme of consolidation really focused on horizontal economies of scale.

What does that mean?

That means a potential combination between companies and the same area of the value chain.

Time warner and cox would be a horizontal deal.

Comcast and nbc would be a vertical deal.

You are starting to see scale play a major role.

This is an industry that is already extremely consolidated at the top, but fragmented with hundreds of thousands of cable systems being scooped up as we speak.

If you look at the top multi channel providers, you get a sense of why they need to get bigger to be better positioned in these kinds negotiations.

This text has been automatically generated. It may not be 100% accurate.

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