Les Moonves CBS Upfront
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In response to CEO memo, cable operator says The Eye’s current asking price does not represent a ‘good value’

CBS fanned the flames of its contract dispute with Time Warner Cable by releasing a memo penned by topper Les Moonves in which he claimed the cable operator’s payments to The Eye are “out of whack” — while TWC responded by reiterating that the CBS hikes are unreasonably steep.

The escalating war of words indicates the two sides aren’t closer to reaching a deal, which could result in 13 CBS-owned stations in L.A., New York, Dallas and five other markets going dark for some 3 million Time Warner Cable subscribers on Thursday, July 25, at 9 a.m. Eastern. The companies said they extended the previous deadline from Wednesday at 5 p.m. Eastern.

“It’s not like Time Warner Cable doesn’t have the money,” Moonves said in the memo, distributed to media reporters Tuesday morning. “Cable is a very, very profitable business, and Time Warner Cable can certainly afford to pay CBS a fair rate for our programming without passing any added cost on to its customers.”

SEE ALSO: CBS Ready to Pull TV Signals in War With Time Warner Cable: Analyst

Currently Time Warner Cable pays between 75 cents and $1 per sub monthly for CBS-owned stations, and The Eye is now likely seeking around $2 per subscriber in retransmission-consent fees, according to RBC Capital Markets.

According to Moonves, “there is a very real threat that Time Warner Cable is going to drop our stations in New York, Los Angeles and Dallas (and possibly Showtime) off the air Thursday morning.”

In response, TWC spokeswoman Maureen Huff said that the cable company is willing to pay for CBS’s programming, “and we have offered them significant fees. But their current demands don’t represent a good value for our customers.”

If CBS and TWC fail to reach a deal by Thursday, CBS-owned cable nets including Showtime and Smithsonian Channel also may get pulled. However, a source close to the talks said a carriage deal for the cable channels could be reached separately from the broadcast stations.

SEE ALSO: CBS Uses Radio Heft in Time Warner Cable Battle

The companies’ prior agreement from 2008 expired June 30. They then extended it through July 24 and have now moved the deadline to Thursday morning while talks continue. Many analysts give CBS the edge in leverage in the talks, noting The Eye’s popular lineup of shows and the upcoming NFL season; meanwhile TWC represents no more than 3% of CBS’s total aud while the affected stations cover 25% of TWC’s subscriber base.

Time Warner Cable alleges that CBS is asking for more than 600% what the cable operator pays in retrans fees to independent CBS affiliates in other parts of the U.S.

Moonves, in the memo, said Time Warner Cable charges subscribers more than $20 per month for broadcast programming but that CBS receives “a tiny fraction of that, as do other broadcasters.”

He also repeated the argument that CBS, which has consistently top-rated programming, receives far less than cable channels with lower viewership. “In fact, CBS is not even in the top 10 recipients of the programming fees paid out by Time Warner Cable,” Moonves said in the memo.

CBS in the last five years has reached deals with all other major pay TV operators, including Comcast, Cablevision, DirecTV, Dish, Verizon FIOS and AT&T U-Verse, according to Moonves. The Eye says it has never gone dark in a retrans dispute over that time.

Time Warner Cable’s Huff said CBS has “refused to offer us assurances that the rate they are seeking for CBS is the same rate they are seeking from others.”

Moonves also claimed CBS has offered Time Warner Cable a short-term extension as the parties continue to negotiate, “but to date they have refused.”

Time Warner Cable denied that is has refused to offer an extension to CBS. “We said we’d be happy to consider an extension offer, but right now we want to continue to negotiate to try to reach an agreement before the expiration,” Huff said.

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