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CBS, Time Warner Cable Make Deal, Ending Blackout

Service restored after month-long dispute 9/02/2013 10:07:29 PM Eastern

CBS and Time Warner Cable reached an agreement on retransmission fees, ending a month-long dispute that blacked out CBS programming to about 3 million cable subscribers.

The dispute revolved around both the amount Time Warner Cable would pay per subscriber as well as CBS' ability to sell its programming to new digital distributors. In the battle’s aftermath, both sides claimed some measure of success as service was restored.

"This was a far more protracted dispute than anyone at CBS anticipated, but in spite of the pain it caused to all of us, and most importantly the inconvenience to our viewers who were affected, it was an important one, and one worth pursuing to a satisfactory conclusion," said CBS CEO Les Moonves in a memo to CBS employees.

"The final agreements with Time Warner Cable deliver to us all the value and terms that we sought in these discussions. We are receiving fair compensation for CBS content and we also have the ability to monetize our content going forward on all the new, developing platforms that are right now transforming the way people watch television," Moonves said.

"As in all of our negotiations, we wanted to hold down costs and retain our ability to deliver a great video experience for our customers. While we certainly didn't get everything we wanted, ultimately we ended up in a much better place than when we started," said Time Warner CEO Glenn Britt in a statement.

The agreement covers both Time Warner Cable and Bright House Networks, which often works with Time Warner Cable, and includes carriage of CBS owned stations across the country, plus Showtime Networks, CBS Sports Network and Smithsonian Channel. Carriage was set to resume at 6 p.m. Sunday. Under the agreement Time Warner Cable agreed to distribute Showtime's TV Everywhere offering, Showtime Anytime, and got VOD rights for CBS' stations in New York, Los Angeles and Dallas.

Financial terms of the deal were not disclosed. Analysts estimated that CBS had been receiving about 75 cents per subscriber per month and was looking for a deal that would take its fee up to $2 per sub by the time it expired.

Time appeared to be on CBS side. When the blackout began, CBS was in summer programming, airing mostly re-runs, with the notable exception of Under the Dome, which CBS produced in a unique deal with Amazon. Amazon got rights to stream episodes of Under the Dome four days after they aired on CBS, one potential area of conflict between CBS and its traditional distribution partners.

Since then, CBS began its coverage of the most high profile matches at the U.S. Tennis Open and was getting ready to begin its coverage of college football and the National Football League. Big ticket sports properties command fans' attention and are one reason why broadcasters are able to get increasing fees from distributors.

CBS was also helped when it was able to reach a retransmission deal with Verizon last week, saying that the terms were similar to those offered to Time Warner Cable.

Although most deals get worked out quietly, retransmission battles have increasingly led to blackouts. The CBS-Time Warner Cable blackout was one of the longest involving major markets. The intensity of the battles is creating calls on Washington to change the laws and regulations governing retransmission. Those rules tend to favor broadcast networks and their stations, which have exclusive control over their programming, versus distributors who face competitors who can deliver the programming if they are willing to pay the price.

In his statement, Britt said "We're pleased to be able to restore CBS programming for our customers, and appreciate their patience and loyalty throughout the dispute."

Britt added: "We are also encouraged by the 50+ consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules. The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love. We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon."

In his note to employees, Moonves said "I want to take this opportunity to thank all of those who worked so diligently – around the clock in many cases – to produce this excellent outcome. Thanks go to our Chief Operating Officer, Joe Ianniello, who spearheaded the negotiating efforts, and to Ray Hopkins, our new president of television distribution, who was our chief negotiator."

"Supporting their efforts were the tireless teams at law, marketing, communications and virtually every other department in our company, all of whom came together to make sure this important job was done right. Our thanks to them all," Moonves said, adding, "This has been a difficult time for our viewers and for CBS. I am glad it's behind us. After a terrific summer of programming, we now all look forward to the new television season. It's good to be back."

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