CBS, Time Warner Cable waiting for the other guy to blink

TWC.jpgThey have until Wednesday to resolve a payment dispute that threatens to take KCBS and KCAL off the TWC lineup. Also affected would be the NY and Dallas markets. CBS-owned stations currently receive between 75 cents and $1 per subscriber, but CBS, looking to bring in more revenue from re-transmission fees, is asking for roughly twice that, according to news reports. As is common in these kerfuffles, each side is lobbying for viewer support so as to pressure the other (KCAL was airing sky-is-falling notices during the Dodger game on Sunday). Actually, this is a slow-ish time for TV watching, so it wouldn't be surprising to see CBS pulling the plug, at least for a bit. It's really a numbers game: CBS has to calculate how much advertising revenue would be lost short term, while Time Warner Cable must figure out its losses from cable subscribers. Not to sound like a cliche, but the stakes are huge: Any deal with CBS could be used by other content providers in future negotiations with TWC. Overlaying the talks are other factors - TWC is shelling out huge money for its new LA sports channels; CBS is under pressure from Aereo, the startup that streams broadcast signals over the Web in NY and other markets (but not LA); and viewers are being lost to streaming services like Hulu and Netflix. There also are rumors that TWC could be sold. From the WSJ:

The companies have until Wednesday to strike a carriage deal. Otherwise, roughly three million Time Warner Cable customers in markets including New York, Los Angeles and Dallas could see CBS's flagship broadcast network disappear from their cable service. CBS's Showtime premium network would also be dropped. CBS has a lot riding on the talks. The company has told investors it plans to roughly quadruple the so-called retransmission revenue it receives from pay-TV operators to $1 billion by 2017, translating to about $1.20 to $1.25 a subscriber per month, according to analyst estimates. Are fans of CBS's "The Big Bang Theory" about to get a big surprise and see it taken off the primetime schedule? Amol Sharma has the latest on CBS's impending battle with Time Warner Cable over a new carriage agreement.

From my piece on TWC in the June issue of Los Angeles magazine:

Between 2007 and 2012, Time Warner Cable's video subscribers fell about 8 percent, or by 1 million (another 119,000 were lost during the first quarter of 2013). Profits were up 29 percent last year, though that was largely because of the company's growing Internet and phone services. TV is another story: In the past four years program fees surged 32 percent, more than three times as much as the Consumer Price Index, which measures inflation. During that time, subscription bills went up, too, but according to chief executive Glenn Britt, not enough to offset the increases paid to content providers. Britt says that the industry is going through a "complicated set of structural imbalances" that hurts consumers as well as the bottom line. "It's clear that it can't continue forever," he told analysts. "What is less clear is what will happen to change the situation or when."

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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