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Time Warner Drops CBS Stations

New York, Los Angeles, Dallas subs affected 8/02/2013 05:12:18 PM Eastern


UPDATED: 8:17 p.m. ET

Time Warner Cable dropped CBS programming in New York City, Los Angeles and Dallas after an extension in their retransmission talks expired at 5 p.m. ET.

CBS said Time Warner Cable dropped its networks even after it offered an extension.

The network disputed Time Warner Cable's stance that it was asking for a 600% increase. "Our requests are far more reasonable and well in line with what the industry is paying for content."

"We deeply regret this ill-advised action, which is injurious not only to our many affected viewers, but also to Time Warner Cable itself. Throughout this process, Time Warner Cable has conducted negotiations in a combative and non-productive spirit, indulging in pointless brinksmanship and distorted public positioning - such as the fictional and ridiculous 600% increase CBS supposedly demanded - while maintaining antiquated positions no longer held by any other programming distributor in the business. CBS, for its part, is eager to make an agreement in line with the kind it has struck with every other cable, satellite and telco provider, and has continually sought reasonable term extensions to get that job done. This is the first time in its history that CBS has been dropped from a cable system. Time Warner Cable, on the other hand, has a long history of taking channels off the air - more than 50 in the last five years alone. It has also chosen to drop Showtime, which is owned by CBS, a move that is completely unnecessary and totally punitive to its subscribers," CBS said in a statement.

"What CBS seeks, and what we always have sought from the beginning, is fair compensation for the most-watched television network with the most popular content in the world. We will not accept less. We will not sign away rights not granted to others. We will not give up our channel position or any other asset by which our viewers identify us. We will also not be subjected to pointless maneuvers like a series of one-hour extensions and mini-drops that do nothing for either side but annoy our viewers. We hope and believe this period of darkness will be short and that we can all get back to the business of providing the best entertainment, news and sports to the Time Warner Cable customers we both serve," CBS said.

Time Warner Cable said it was also taking down Showtime, TMC, FLIX and Smithsonian, all owned by CBS Corp.

"We agreed to an extension on Tuesday morning with the expectation that we would engage in a meaningful negotiation with CBS. Since then, CBS has refused to have a productive discussion. It's become clear that no matter how much time we give them, they're not willing to come to reasonable terms.  We thank our customers for their patience and support as we continue to fight hard to keep their prices down," Time Warner Cable said in a statement.

Time Warner Cable CEO Glenn Britt also issued a statement Friday evening on twcconversations.com where he said, "It is often said that these disputes are just two giant corporations
fighting over money. But the skyrocketing price of programming has a
direct impact on your monthly cable bill. If we paid CBS what they are
asking, the next broadcaster or programmer would ask us -- and others
like FiOS, AT&T and DirecTV -- for even higher prices next time.
Cable TV bills would skyrocket. You'd be mad. We'd be mad. It won't end
well for anyone. So, we have to take a tough stand in these negotiations
and fight to hold down the price we all end up paying for programming
and to carry on reasonable and customary terms."

Showtime called Time Warner Cable's decision to pull the plug on its channel "not only completely unnecessary, but totally punitive to our subscribers."

In a statement, the premium channel said:

"Showtime has been working in good faith with Time Warner Cable to work out a contract, and is deeply disappointed with Time Warner Cable's decision to pull Showtime channels. Unfortunately, Time Warner Cable and Bright House Networks subscribers will be denied access to new episodes of the climactic eighth and final season of Dexter, and the most popular freshman series the network has ever had, Ray Donovan. Additionally, subscribers will also miss the opportunity to catch up on past seasons of Homeland before the series' fall debut, new episodes of Web Therapy and countless movies, specials and documentaries.

"Showtime has successfully negotiated a number of deals with all of the other major distributors, including Comcast, DirecTV, Cox, Dish, Verizon FiOS, Cablevision and AT&T U-Verse, among others.  Time Warner Cable has taken nearly 50 channels off the air in just the past five years in disputes such as the one involving CBS and Showtime now.

"We hope and believe this period of darkness will be short, and we can all get back to the business of providing award-winning original series, hit movies, specials, provocative documentaries, and our hard-hitting sports programming to the Time Warner Cable and Bright House Networks customers we both serve."

Showtime urged it subscribers to call Time Warner Cable to restore the service and put a list of alternate providers on its website.

That extension came after marathon talks Monday that were extended hourly from 5 p.m. ET till midnight, when both sides issued angry statements and CBS' networks began to be taken down by Time Warner Cable.

Shortly after, Time Warner Cable said it stopped taking down the CBS networks at CBS' request and the new deadline was agreed to.

The long-term deal signed by Time Warner Cable and CBS in 2009, expired July 1. Negotiations were quiet until July 18, when the two companies started trading barbs with competing ad campaigns and websites. 

Time Warner Cable claims the broadcaster is asking for a 600% premium to what other CBS broadcast stations charge it on average. CBS counters that TWC is refusing to negotiate the same sort of deal that other distributors have reached with the network.

Investment firm RBC Capital estimates that CBS is now receiving between 75 cents and a $1 per sub per month from Time Warner Cable. Analyst Marci Ryvicker of Wells Fargo said the expired CBS-TWC agreement is considered a sweetheart deal. She says CBS is pressing for a deal that will eventually ramp up to $2 per sub.

CBS, having long been the most-watched broadcast network, has chosen an aggressive course when it comes to retrans, recording a 62% rise in payments from cable, satellite and telco TV providers in the first quarter of 2013. The company is said to seeking up to $500 million in total retrans fees in 2013. That total could grow to $1 billion by 2016, four times the $250 million it reaped in 2012.

Cable operators have not done well in disputes with programmers, but on Friday analyst Richard Greenfield of BTIG Research said this fight could have an upset winner. "We believe Time Warner Cable must stand firm, which most likely means an extended multi-week blackout of the CBS network in NY, LA and Dallas," Greenfield said in a research note. "Time Warner Cable will have virtually no leverage in battles with other broadcasters that occur at the end of 2013/early 2014. In turn, this is "the battle" to fight.  Simply put, this is a "'Once-in-a-Cable Lifetime Opportunity' to battle retrans."

Greenfield argues that given the big advertising markets involved, with CBS in summer programming and with Aereo available to provide CBS programming to Time Warner Cable subscribers, Time Warner Cable has more leverage than a distributor usually has in these negotiations.

Time Warner Cable's agreement with CBS covers CBS-owned stations in eight markets within TWC's footprint, including WCBS-TV and WLNY-TV in New York, KCBS-TV and KCAL-TV in Los Angeles and KTVT-TV and KTXA-TV in Dallas-Ft. Worth.   The other affected stations are: Boston (WBZ, WSBK), Pittsburgh (KDKA, WPCW-CW), Denver (KCNC), Detroit (WKBD-CW) and Chicago (WBBM).

The FCC urged the parties to do a deal.
"The Commission is disappointed that the respective parties could not reach a retransmission agreement," an FCC spokesperson said of the CBS-TWC blackout. "Our primary concern remains with consumers and viewers in the affected markets. We urge all parties involved to resolve this situation as soon as possible." 
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