The 2008 agreement between Time Warner Cable and CBS covering carriage of multiple broadcast TV stations and cable nets including Showtime expires June 30, according to industry sources — and retransmission fees figure to be a major point of contention as the deadline approaches.
The Eye expects to generate considerably more revenue from retrans fees in 2013 and the years ahead. CBS reported a 62% rise in retrans payments from cable, satellite and telco TV providers in the first quarter of 2013, and the company projects those to roughly double to $500 million this year.
On the other side, Time Warner Cable has been one of the most combative pay TV providers in trying to hold down rising programming costs. The MSO has shown a greater willingness than its peers to let such contract disputes go public.
The companies’ current agreement covers CBS’s owned-and-operated stations in Time Warner Cable markets, including WCBS-TV New York, KCBS-TV Los Angeles and KTVT-TV in Dallas-Ft. Worth. In addition, the negotiations include carriage of Showtime’s suite of premium nets and other cable channels including Smithsonian Channel. TVGN, the former TV Guide Network, is believed to not be part of the current negotiations; CBS acquired a 50% stake in the cabler this spring, which is jointly owned by Lionsgate.
Such omnibus deals are complex because they encompass video-on-demand and TV Everywhere programming distribution rights.
The two sides have been talking for some time already, according to one source familiar with the situation. It’s too early to tell whether the discussions could break down and result in a blackout of CBS’s local stations or cable nets, the source added.
CBS will likely use this fall’s NFL season as leverage in haggling for bigger retrans fees from Time Warner Cable. But because the current deal ends June 30, the operator may not feel any urgency to cut a deal until September when the regular season begins.
Last month, Time Warner Cable avoided a blackout of 24 stations owned by LIN Media with an eleventh-hour retransmission-consent deal. The MSO had previously claimed LIN was seeking a rate hike of more than 50% per subscriber, while LIN said the fees it was seeking were far below what TW Cable pays for less-watched cable networks.
Separately, CBS on Wednesday announced the promotion of CFO Joe Ianniello to chief operating officer. Among other things, in his new role he will be tasked with securing higher retrans payments from pay TV providers like Time Warner Cable, according to analysts.
“We think Ianniello will be very focused in a drive for retrans consent fee revaluation, with an eye toward a monthly carriage fee ~$2/sub at some point in the next few years,” RBC Capital Markets analysts David Bank and Nicholas Caplan wrote in a note.
The RBC analysts added: “While we don’t expect it to come to pass, we think Ianniello will be more empowered than his predecessor in these negotiations to ‘go dark’ in the process of negotiations in the short-term, in order to secure greater longer-term compensation CBS deems in-line with market value.”