Time Warner Blackout of CBS Goes into 2nd Day

(AP) Time Warner blackout of CBS goes into 2nd day
By TOM KRISHER
AP Business Writer
Time Warner Cable’s blackout of CBS continued Saturday, and neither side indicated a resolution of their dispute over fees is imminent.

Time Warner dropped CBS Friday in New York, Los Angeles, Dallas and several other cities, 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.

Without a deal, Time Warner customers were missing Tiger Woods’ attempt at his 8th win at Firestone Country Club near Akron, Ohio, in this weekend’s Bridgestone Invitational. Woods held a lead of 7 strokes as he played Saturday. CBS fans also won’t see programs such as “Under the Dome” or “60 Minutes.”

Time Warner cut off the CBS shows as well as cable networks Showtime, TMC, Flix and Smithsonian. The cable company’s customers are caught in the middle, and the stakes will only go higher. CBS will air the PGA’s final major tournament starting Thursday, and its preseason National Football League coverage begins on local stations next week.

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’ demands, he said, then other programmers will ask for more as well.

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.

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 industry-wide 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.

Time Warner spokeswoman Maureen Huff said the company is not worried about customers switching to a different TV-service provider to get CBS. Programming fee disputes are common in the industry and could happen to other providers in the future, she said, adding that the number of such disputes has risen in the last few years.

Indeed, a competitor, DirecTV, came to Time Warner’s defense on Saturday, issuing a statement that praised the cable company. “In trying to protect our won 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.

The CBS stations that went dark are WCBS and WLNY in New York; KCBS and KCAL in Los Angeles; KTVT and KTXA in Dallas; WBZ and WSBK in Boston; KDKA, WPCW-CW in Pittsburgh; KCNC in Denver; WKBD-CW in Detroit and WBBM in Chicago.

About 2.5 million Time Warner Cable customers lost access to Showtime, the premium channel that carries shows such as “Dexter.”

Time Warner said it would temporarily replace lost programming with shows from Starz Kids and Family.

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Krisher reported from Detroit. David B. Caruso contributed from New York.