Time Warner Cable: CBS should be sold 'a la carte'
LOS ANGELES (AP) — Time Warner Cable Inc. CEO Glenn Britt has offered to end a four-day blackout of CBS stations in three major cities, saying the cable operator would allow CBS to sell its stations' signal "a la carte" to consumers instead of bundling it with other channels.
That would "allow customers to decide for themselves how much value they ascribe to CBS programming," Britt said in a letter to CBS CEO Leslie Moonves that was released to the media.
CBS Corp. called the proposal a "sham."
"Anyone familiar with the entertainment business knows that the economics and structure of the cable industry doesn't work that way and isn't likely to for quite some time," it said.
CBS signals have been blacked out to some 3 million Time Warner Cable subscribers in New York, Los Angeles and Dallas since Friday in a dispute over how much the cable operator has to pay for CBS programming. Britt's proposal is a radical departure from how TV is sold today — in packages that can contain a hundred or more channels, many of which consumers don't watch.
Craig Moffett, an industry analyst with Moffett Research LLC, called the proposal "mostly a bit of theater" that CBS would never accept.
"CBS would never agree to a model where customers could opt to take it or leave it," he said. "The economics of that would never be as attractive as the current model, where everyone has to pay whether they want the service or not."
Investors seemed to shrug at the proposal. Time Warner Cable shares slipped 68 cents or half a percent to finish at $116.42. CBS shares dipped 67 cents, a little more than 1 percent, to close at $53.86 Monday.
TV station owners like CBS want to boost revenue and profit from the fees they charge to distributors — and many industry observers see this as their prime engine of growth in the coming years. But pay TV distributors say they're trying to keep costs low to hang onto subscribers sick of paying higher monthly bills. Retransmission fees paid by cable, satellite and telecommunications providers are set to double by 2018 to $6 billion, according to research firm SNL Kagan.
The fee fights have become common in recent years. Most have been resolved within a few weeks. However, the American Television Alliance (ATVA), a grouping of pay TV distributors, says there are now a record 79 U.S. markets being affected by blackouts. Besides the Time Warner Cable dispute with CBS, starting on Thursday some Dish Network Corp. subscribers lost access to some ABC, NBC and Fox affiliate stations owned by Raycom Media Inc. in 36 markets in 15 states from Florida to Hawaii.
Tens of thousands of DirecTV subscribers lost access to a local CBS station in Odessa, Texas, on Thursday. Five other blackouts are ongoing, including one between Cox Communications and Mt. Baker Cable in Seattle that has lingered since Jan. 1, 2012, according to the ATVA.
The basis for all of the disputes is the 1992 Cable Act, which allows TV station owners to either force pay TV operators to carry their signals for free, or bargain for carriage at whatever rates they can extract in negotiations. Since then, leverage in such negotiations has shifted dramatically in favor of the content owners, who can demand higher fees or pull their signal. Cable TV operators have usually been forced to pay higher rates or risk losing subscribers to satellite TV companies, a shift that has been happening for years.
But the situation has gotten so dire that DirecTV, which in the past has seen competitor blackouts as a way to steal subscribers, rallied to Time Warner Cable's defense in a statement on Saturday, saying "all pay TV customers are feeling trapped and helpless" by "ridiculous" rate increase demands.
The longer the fight goes on, the greater the chance that Congress gets involved to balance the playing field, said Rich Greenfield, a media and technology analyst with BTIG Research. "Having the government poking their nose into the situation could be decidedly bad for CBS," he said.
Legislation isn't pending, but lawmakers and lobbyists are considering folding new retransmission rules into a bill required to renew the license of satellite TV operators DirecTV and Dish by the end of 2014. Hearings on the matter are likely to start up around late September, according to ATVA spokesman Brian Frederick. "Our video laws need updating now more than ever," he said.