NEW YORK — Time Warner is heading for a showdown at the Western Cable Show with a number of major cable operators, including three of the biggest: Media One, Comcast and Cablevision Systems Corp.
The confrontation comes as TW demands a license-fee payment for its TBS network, beginning Jan. 1, that could run as high as $10 million a year — plus annual increases over the five-year life of the contract — for a large multisystem operator.
The newest wrinkle in the 11th-hour negotiations is the aggressive intervention of a just-formed company called United Network Transport (UNT), which has created a cheaper alternative for cable operators that don’t want to pay TBS’ tariff.
While TW has drawn up a non-negotiable rate card that averages out to a monthly fee of 25¢ a subscriber, UNT will transport TBS’ signal, starting Jan. 1, for about 6¢ a month per sub. The cable operator that signs with UNT will also have to pay a fee to the Copyright Royalty Tribunal running from 2¢ a month per sub to a dime, depending, among other things, on the operator’s size and whether the op brings in other distant TV-station signals.
The principals in UNT are Larry Bloom, a communications attorney, and Peter Sclafani, a veteran cable engineer. Bloom, reached by phone in his office in suburban New York City, said, “If we haven’t reached critical mass in subscribers by Dec. 15,” the company would not go ahead with its plans to carry the TBS signal. He would neither confirm nor deny a published report that UNT’s critical-mass figure is about 8 million subscribers.
Bloom said the Western Show, which kicks off today in Anaheim and runs for four days, will be crucial to TW, which will blanket the Anaheim Convention Center with affiliate-sales executives pushing hard to close deals with cable operators that haven’t signed for TBS.
UNT will not attend the Western Show because “we don’t have the numbers of executives in pinstripe suits that Time Warner has,” Bloom said.
TW’s main inducement to cable operators is the two minutes an hour it’s offering for local commercials in TBS’ schedule for the first time. TW says those spots could harvest enough revenue to cancel out some or all of the license-fee payment the operator will pay. Those two minutes would not be available to operators who deal with UNT.
A TBS spokeswoman said the network already has license-fee deals with cable operators covering about 43 million subscribers out of a universe of 67 million or so. But TW still hasn’t reached agreements with about half of the top-25 cable operators. TW is getting nervous because if an operator goes one day beyond the Jan. 1 date without signing a contract, it will have to pay copyright payments for the next six months.