Time Warner Bright House blackout of CBS goes into 2nd day

STAFF AND WIRE REPORTSAugust 4, 2013 

Bright House Networks and Time Warner Cable's blackout of CBS continued Saturday, and neither side indicated a resolution of their dispute over fees is imminent.

The cable companies dropped CBS Friday in Tampa Bay, including and Manatee County, along with cities such as New York, Los Angeles and Dallas, leaving three million customers without the network's programs. The issue is fees that the cable company pays CBS to air its programs.

Each has accused the other of making unreasonable demands. On Saturday, the two sides even seemed to disagree on the status of negotiations. A Time Warner spokeswoman said Saturday afternoon that negotiations are ongoing. CBS said it expects talks to resume soon, but the decision rests with Time Warner and Bright House Networks.

In the Tampa Bay region CW 44 and Showtime are off of the air for Bright House Networks, said Joe Durkin, Sr. Director of Corporate Communications. In Manatee County specifically, the local CBS affiliate was not pulled because of the contract negotiations.

While Time Warner and Bright House Networks are separate companies, Time Warner Cable is leading negotiations with CBS on behalf of both cable companies, Durkin said.

On Friday Bright House sent an email to local customers letting them know that the agreement with CBS Corporation had expired as of 5 p.m. Friday. Showtime and The Movie Channel customers were offered programming from Starz or Encore, as well as credits based on how many days they are to be without the subscribed programming.

"We expect negotiations to continue and anticipate that the channels will be returned to the lineup shortly," the email to local Bright House customers said. "We also expect Showtime to return any popular programs that were missed on Showtime On Demand.

"It is important for our customers to know that we carry hundreds of channels - and agreements are being negotiated and renewed all the time. Normally, these situations eventually get resolved - so we believe this is a temporary situation. Get the latest updates about the blackout and what channels are affected in your immediate area at onyourside.brighthouse.com."

Late Friday night, Time Warner posted a message to subscribers on its website from CEO Glenn Britt saying that CBS has been "uncompromising" by making demands that are inconsistent with deals made with hundreds of other broadcasters. If Time Warner gives in to CBS's demands, he said, then other programmers will ask for more as well.

"Cable TV bills would skyrocket. You'd be mad. We'd be mad. It won't end well for anyone," Britt wrote.

Time Warner charges about $20 monthly per subscriber for broadcast channels. One industry analyst estimates that CBS got 75 cents to $1 per Time Warner subscriber in the contract that recently expired.

CBS said this is the first time it's been dropped by a cable system, and it has successfully negotiated deals with Comcast, Cablevision, Charter, DirecTV, AT&T, Verizon and other companies.

"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," CBS CEO Leslie Moonves said in July memo to employees.

The fight could be a long one with CBS trying to gain revenue from retransmission fees to buffer against cyclical swings in advertising revenue and Time Warner caught in a competitive environment that limits price increases to pay for rising programming costs.

Research firm SNL Kagan estimates retransmission fees paid to programmers will reach $3 billion industrywide this year and double to $6 billion by 2018.

Earning revenue from pay TV subscribers is crucial to CBS's growth prospects, analysts say. Even though CBS sends its signal out over the airwaves for free to anyone with an antenna, about 85 percent of its viewers watch TV through a pay TV provider.

Indeed, a competitor, DirecTV, came to Time Warner's defense Saturday, issuing a statement that praised the cable company. "In trying to protect our own customers, DirecTV has certainly had its share of these battles, so we applaud Time Warner Cable for fighting back against exorbitant programming cost increases," the statement said.

The dispute may bring some government action. In New York, the City Council announced Saturday that it would convene hearings Thursday on the spat, demanding answers from both companies. "Television service should not be dependent on the whims of a bitter corporate standoff," said the council's speaker, Christine Quinn, who is also a leading candidate for mayor.

Time Warner is fighting to hold the line on costs as it struggles to keep subscribers. It lost 191,000 cable TV subscribers in the most recent quarter, ending with 11.7 million at the end of June.

Still, both companies posted healthy quarterly earnings this week. Time Warner Cable grew its net income 6 percent to $481 million, or $1.64 per share, as revenue rose 3 percent to $5.6 billion. CBS grew net income 11 percent to $472 million, or 76 cents per share. CBS's revenue also grew 11 percent to $3.7 billion thanks in large part to the fees that are in dispute with Time Warner Cable.

About 2.5 million customers lost access to Showtime, the premium channel that carries shows such as "Dexter."

Material from the Associated Press was used in this report

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