CBS may be losing about $400,000 daily because of the blackout in major Time Warner Cable markets, now entering its fourth day — although the total financial blow to the Eye from the spat likely will be minimal, according to Wall Street firm UBS.
The estimate includes lost retrans revenue and a loss of advertising dollars at both the network and CBS local stations, according to UBS. Every two weeks of being dark on TW Cable equals a loss of 1 cent per share, the firm calculated.
On Friday at 5 p.m. Eastern, Time Warner Cable pulled CBS signals for approximately 3 million subscribers, primarily in New York, L.A. and Dallas. The operator also dropped Showtime and three other CBS-owned cablers, while the Eye retaliated by blocking Time Warner Cable broadband subs from accessing full episodes online.
If history is a guide, the standoff should be resolved in less than two weeks, UBS said, although other observers have suggested CBS and Time Warner Cable may not come to terms until September.
“Our view continues to be that consumers have more loyalty to the content rather than the company which is responsible for distribution, and with contracts often running 5+ years, CBS can’t afford to take below-market value given the inability to renegotiate terms,” UBS analysts John Janedis, Jaime Morris and Michael Russo wrote in the Aug. 4 note.
CBS’s estimated daily loss of $400,000 is small coin in relation to the company’s total revenue: In the second quarter, the Eye reported $3.7 billion in revenue and net income of $472 million.
Meanwhile, Time Warner Cable also stands see financial losses mount the longer the feud continues, as disgruntled customers cancel. UBS did not have estimates on the effect of the blackout on the cable operator.
CBS said Sunday that the companies were not actively negotiating. The Eye said Time Warner Cable rejected an offer to extend their previous deal while talks continued, but the cable operator disputed that and claimed it offered CBS a one-year extension.
Prior broadcast and cable blackouts have had limited effect on stock prices, according to UBS. The firm cited Fox’s 15-day outage on Cablevision in 2010, a 28-day blackout of Fox cable channels on Dish Network in 2010, and Viacom’s nine-day blackout on DirecTV last summer as having had little impact on share prices.