CBS and Time Warner in a high-stakes standoff
The dispute has resulted in a blackout of some channels for customers in New York, Los Angeles and Dallas. Both companies will lose as the battle drags on.
At issue is CBS' plan to hike the fees it charges Time Warner Cable to carry its signal, also known as retransmission fees. According to The New York Times, CBS has told analysts that it wants an increase from $1 to $2 per subscriber, which Time Warner has denounced as exorbitant.
The battle has resulted in Time Warner blacking out CBS for customers in New York, Dallas and Los Angeles.
These disputes are increasingly common. In the CBS-Time Warner case, however, there are also disagreements over access to the network's catalog of older shows.
Time, however, isn't on either company's side. CBS can't afford to alienate advertisers ahead of the start of the new television and NFL seasons. For Time Warner, the blackout may encourage customers to try satellite and other alternatives.
Retransmission fees are soaring. According to data from SNL Kagan cited by the Times, those fees were $2.4 billion last year and are expected to hit $4.3 billion in 2015.
There are also advertisers to consider.
The Tiffany Network got more than $2.5 billion in commitments, also known as upfronts, from advertisers for the upcoming television season. Networks base their prices for commercials on the size of the audience they expect to reach. If the shows don't attract the audience the network expects, advertisers are eligible to receive "make goods" -- essentially free commercial time -- in compensation.
Though the promised audience numbers is a closely guarded secret, these targets probably will be difficult to hit if CBS continues to block an estimated 3.5 million Time Warner Cable customers in New York, Los Angeles and Dallas. Other CBS-owned cable networks, including Showtime, are also affected.
Negotiations between the two companies have broken down and now analysts are now expecting the fee dispute to linger through September.
CBS is the top-rated network, thanks to hits such as "Two Broke Girls," "Two and a Half Men" and "Big Bang Theory," which Advertising Age estimates each fetched more than $200,000 for a 30-second spot last season. CBS and Comcast's (CMCSA) NBC are in the midst of a $28 billion deal to broadcast NFL games, so there are financial pressures there too. Pro football is by far the most popular sport.
What the CBS-Time Warner dispute shows is that the pay television industry is breaking down as fights over fees become more common. Congress needs to act before it comes apart completely.
--Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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I pay $30/mo for Internet. I have a smart TV for streaming Netflix, etc to supplement the free digital channels I get. I was once a slave to DirectTV and had the same network blackouts during negotiations as the Time Warner subscribers are experiencing. It's been a year now and I am still alive...yes, I miss some of the shows I used to watch, but discovered new ones as well. I sure don't miss the blackout crap and rising subscriber fees!!
When they, (ALL the networks, and cable/satellite channels) totally ignore the realities, and pay their executives such exorbitant salaries and benefits, also paying the actors such unrealistic amounts for inane performances, something is seriously wrong. We are supposed to have federal monitors watching out for OUR interests, when in reality, they are being totally ignored. The politicians are covering their bankrolls and ignoring their EMPLOYERS in this mess. Granted, so much television nowadays is either ridiculous "reality" shows, or overpriced sporting events, there is not much actual entertainment to watch/listen to nowadays.
Too many people are getting rich off the average viewer nowadays. By that, I'm referring to the C.E.O.'s, C.F.O.'s, actors, and politicians, not Mr. and Mrs. working person. (And nowadays, most families do have two earners, just to afford to feed, clothe, and shelter their families.) And the aforementioned people could actually care less.
Lovely, huh. I get to try and resolve my cable issues from a person who sounds like they've sucked a half gallon of helium with no English speaking skills or vocabulary.
Hey, Comcast... me don't love you long time!
The networks CBS, NBC. ABC, CNN, MSNBC, should pay the cable net works money to carry the crap they call programs not the other way around. i could care less about them being on my cable.
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Oct natural ... More
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