Time Warner Cable drops CBS in NY, LA, Dallas

Three million Time Warner Cable customers in New York, Los Angeles and Dallas lost access to CBS programming in a fee dispute Friday, threatening their ability to watch popular shows like "Under the Dome" or see Tiger Woods pursue his eighth win at the Firestone Country Club.
AP Wire
Aug 4, 2013

The nation's second largest cable operator said that CBS refused to have productive negotiations, which were repeatedly extended after their previous deal expired at the end of June.

As Friday's blackout stretched past a couple of hours, it appeared consumers would be caught in the crossfire for some time.

"It's become clear that no matter how much time we give them, they're not willing to come to reasonable terms," Time Warner Cable said.

Multiple stations that carry CBS programming in New York and Los Angeles were replaced around 2:15 p.m. Pacific time with a message from Time Warner Cable saying that CBS had "demanded an outrageous increase" in the fees it demands to carry its TV stations' signals.

CBS said it regretted Time Warner Cable's decision, calling it "ill-advised." The broadcaster said it asked for an extension, but that Time Warner Cable didn't agree to it.

Most of the cable subscribers affected live in New York, Los Angeles and Dallas, but customers in other markets also lost signals.

The CBS stations that went dark are WCBS and WLNY in New York; KCBS and KCAL in Los Angeles; KTVT and KTXA in Dallas; WBZ and WSBK in Boston; KDKA, WPCW-CW in Pittsburgh; KCNC in Denver; WKBD-CW in Detroit and WBBM in Chicago.

About 2.5 million Time Warner Cable customers also lost access to Showtime, the premium channel that carries shows such as "Dexter." TMC, FLIX and Smithsonian channels — all owned by CBS Corp. — also went dark.

In its message to subscribers, Time Warner Cable said it would replace the lost programming with shows from Starz Kids and Family temporarily.

The fight centers on the rising fees that TV station owners like CBS charge cable and satellite companies to retransmit their content. Research firm SNL Kagan estimates retransmission fees will reach $3 billion industrywide this year and double to $6 billion by 2018.

SNL Kagan analyst Robin Flynn said that figure could be revised upward soon as TV station groups merge to gain leverage at the bargaining table. For example, Tribune Co. announced plans to buy Local TV to form a group of 42 TV stations last month.

Earning revenue from pay TV subscribers is crucial to CBS's growth prospects, analysts say. Even though CBS sends its signal out over the airwaves for free to anyone with an antenna, about 85 percent of its viewers watch TV through a pay TV provider. Such fees ensure the company is not so reliant on advertising dollars, which rise and fall with the economy.

Meanwhile, Time Warner Cable is fighting to hold the line on costs as it struggles to keep subscribers. It lost 191,000 cable TV subscribers in the most recent quarter, ending with 11.7 million at the end of June.

Even as the dispute lingered on, both companies posted healthy quarterly earnings this week. Time Warner Cable grew its net income 6 percent to $481 million, or $1.64 per share, as revenue rose 3 percent to $5.6 billion.

CBS grew net income 11 percent to $472 million, or 76 cents per share. CBS's revenue also grew 11 percent to $3.7 billion thanks in large part to the fees that are in dispute with Time Warner Cable.

Jonathan Atkin, an analyst with RBC Capital Markets, said TV distributors are taking a stand because programming costs are going up about 10 percent this year, an increase that's too high to pass onto customers.

"They feel pressure when some of these cost drivers are going up the way they are," Atkin said. "They do need to show some teeth and try to negotiate something better."

He said the dispute would probably end quickly to avoid depriving customers of key sporting events, like the PGA Championship starting on Thursday. CBS also airs its first preseason NFL game Aug. 23.

Comments

Mystic Michael

I don't know who's right and who's wrong - because "right and wrong" probably doesn't even figure into it. It's all about money - as usual - and who gets to have more of it, and who has to give it up.

I do know that one reason why Time Warner Cable is losing customers is because they treat their customers like crap. I should know.

Unfortunately, the way service provision is structured, one's options for going to a competitor are strictly limited. TWC knows this - and so they have little incentive to treat us better. If a competitor ever came along to put them out of business, I would not lose a wink of sleep over it...unless their service just happened to be even worse!

Lanivan

MM - This is off-topic, but do you have any thoughts on or experience with the redistricting commission concept to counter gerrymandering that Richard Kamischke discusses in his community column from Friday?

Mystic Michael

No experience with it, Lanny. And not a lot to add with regard to solutions, except to comment that practically any reform is likely to make for a better situation than we have currently. And that I welcome any step in the right direction - even a baby step.

It is extremely difficult to get politics out of the process 100%, simply because the mechanisms by which any solution would get implemented are themselves subject to political manipulation. To do a completely thorough job of it, you would almost have to reform all systems at once so as to leave no loopholes - a practical impossibility, given how tough it is simply to make ANY changes in just one system by itself.

You can analyze it in terms of game theory: Any system that rewards self interest or partisan interest more than it rewards service to the collective good, is one that is inherently subject to manipulation and corruption.

Moreover, you can see how such a system will tend to become even more venal & self-serving over time, simply because the elected officials who pay more attention to matters of state than they do to playing the game will tend to leave themselves politically exposed, and thereby wash out at the next election - whereas the population of weasels becomes ever more concentrated all the time, as they eventually rise in seniority & influence.

Any savvy management consultant could tell you: If you want to understand a system, look to where the incentives & disincentives lie. If you want to change that system, change the incentives & disincentives.

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