CBS Is Facing Potential Blackouts in NYC, Dallas and L.A. | Adweek CBS Is Facing Potential Blackouts in NYC, Dallas and L.A. | Adweek
Advertisement

CBS Is Facing Potential Blackouts in NYC, Dallas and L.A.

CBS, Time Warner Cable scrap coming down to the wire

CBS Corp. CEO Les Mooves Photo by Eugene Gologursky/Getty Images

With time running out on an emergency carriage deal extension, CBS Corp. CEO Les Moonves on Tuesday told employees that the network was in danger of going dark in a number of major Time Warner Cable markets.

In a memo issued to CBS staffers earlier today, Moonves said that CBS owned-and-operated stations in New York (WCBS-2), Los Angeles (KCBS-2) and Dallas-Fort Worth (KTVT-11) could go off the air in Time Warner Cable homes within the next 40 hours.

The premium cable network Showtime is also at risk of being dropped in the three markets.

This dispute has escalated over the past few days, and there is a very real threat that Time Warner Cable is going to drop our stations (and possibly Showtime) [on] Thursday morning,” Moonves wrote. “As you can imagine, we don’t take this situation lightly.”

The operator’s retransmission consent agreement with CBS originally had been set to expire on June 30, but both sides agreed on a 24-day extension. In order to comply with FCC regulations that prohibit signal interruptions during sweeps, that date was later pushed back to July 25.

In his note to CBS employees, Moonves spelled out the fundamentals of the carriage beef, saying that TWC is not sufficiently compensating the network for its signal. 

“CBS programs are among the most popular in the industry, and yet there are many cable networks—with considerably less viewership—that receive more money for their programming from Time Warner Cable than we do,” Moonves wrote. “In fact, CBS is not even in the top 10 recipients of the programming fees paid out by Time Warner Cable.”

Analyst David Bank of RBC Capital Markets estimates that the terms of TWC’s expired contract has it paying CBS a retrans fee that fell within a range between 75 cents and $1 per subscriber per month. By comparison, ESPN commands the princely sum of $5.26 a head. (As Moonves said, the discrepancy lies in the ratings. Per Nielsen, CBS last season averaged 11.8 million viewers in prime time while ESPN delivered 3.16 million nightly viewers during its Q4 peak.)

In the meantime, the negotiations continue. At press time, both sides had about 39 hours of wiggle room left on the clock before Thursday’s 9 a.m. deadline.

“We have a great negotiating team in place, and we are determined to get the job done right,” Moonves concluded, adding that CBS has offered yet another short-term extension, one that TWC has refused.

For its part, Time Warner Cable said that while it has offered CBS a “significant” premium for its signal, the network’s demands “don’t represent a good value for our customers.” The cable operator has claimed that CBS is looking for a 600 percent rate increase.

While most observers believe it’s a foregone conclusion that CBS will prevail, at least one analyst said the network may have bitten off more than it can chew. In a note to investors issued last week, BTIG analyst Rich Greenfield said the availability of Aereo in New York and Los Angeles and the relatively sleepy summer broadcast season neutralizes some of CBS’ considerable leverage.

Greenfield added that even the threat of depriving subs access to the summer smash Under the Dome may not be enough to hurt TWC’s position, noting that the show is available on Amazon Prime four days after each original airdate.

“This is the first time we have ever felt that an [operator] was justified in going to war against a broadcaster,” Greenfield said. “CBS would be making a critical mistake to think it had an overwhelmingly strong negotiating position.”

What CBS does have is the National Football League. Should an agreement not be reached and CBS goes dark in New York, millions of Giants and Jets fans will be out in the cold. Such a scenario could make TWC extremely unpopular among football diehards; as Bank characterized it, the threat of losing even a single broadcast could “force a solution, given the must-have nature of the NFL.”  

Advertisement