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Updated: Time Warner Cable Still Carrying CBS Stations, Cable Networks Amid Clash Over Fees

Cable operator announced removal of local stations and national networks from lineups, before reversing course at CBS's request

Time Warner Cable — after announcing it was removing local CBS stations in New York, L.A. and Dallas as well as Showtime and three other CBS cablers from lineups nationwide over a breakdown in contract talks — said it was holding off on going dark on the channels at CBS’s request.

Shortly after midnight Eastern, TWC said the “outrageous demands for fees by CBS Corporation” forced the cable operator to remove several of the Eye’s networks and broadcast stations from customers’ lineups.

But after brief blackouts, Time Warner Cable reversed course. At 12:30 a.m. Eastern Tuesday, the cable operator said, “At the request of CBS, we have halted going dark on their channels.” In addition to the local broadcast stations, Time Warner Cable had planned to remove Showtime, The Movie Channel, Flix and Smithsonian Channel. CBS said the two sides “have agreed to continue discussions.”

The about-face came after the companies announced a series of rolling deadline extensions on Monday night. The previous agreement between CBS and Time Warner Cable, struck in 2008, expired June 30 but the companies extended that through Monday at 5 p.m. Eastern — then pushed it to 8, then until midnight in hourly increments — as they tried to hammer out a deal.

CBS-owned stations have not experienced an extended blackout with a pay-TV operator in nearly a decade. Such high-profile outages not only enrage viewers but also invite renewed scrutiny from policymakers looking to put an end to such standoffs.

The major bone of contention in the rhetoric-laden feud is the price increase CBS has sought for the broadcast stations. Currently Time Warner Cable pays between 75 cents and $1 per subscriber monthly for CBS stations, and the Eye has likely been seeking upwards of $2 per sub ramping up over a period of time, according RBC Capital Markets analyst David Bank.

SEE ALSO: CBS Chief Moonves: Time Warner Cable Can Afford to Pay Us More

The dispute erupted into a public war of words earlier this month, even as the companies continued to negotiate. The melee pits CBS, which is intent on grabbing more revenue from pay TV operators, against TW Cable, which is stubbornly pushing back against hikes in programming costs.

In TV and print ads, Time Warner Cable has alleged CBS is demanding more than 600% what the cable operator pays in retrans fees to independent CBS affiliates in other parts of the U.S. — an “unprecedented” premium, according to TWC. The cable company has urged customers to “contact Congress” and set up a microsite at TWCConversations.com with its talking points on the dispute.

“CBS is driving up the cost of cable TV — charging higher and higher prices for shows they give away for free online and over the air,” the ads said. “It’s time to stand up and say no to broadcasters demanding unreasonable prices.”

After TWC said it was pulling the CBS channels — but before the operator backtracked and halted the blackout — the Eye issued a statement that said in part, “In spite of all our efforts to hammer out a fair agreement, Time Warner Cable has dropped CBS and Showtime from its channel lineup effective midnight EDT.  Meanwhile, they continue to engage in a public campaign of disinformation and voodoo mathematics (featuring wildly inflated percentages) while doggedly restating their positions.”

CBS has waged a PR push on TV, in print, on radio and online at KeepCBS.com. CBS chief Les Moonves, in a memo to CBS employees last week that was distributed to the media, said Time Warner Cable’s payments to the Eye are “out of whack,” claiming the cable company pays CBS less than cable channels with lower viewership.

“It’s not like Time Warner Cable doesn’t have the money,” Moonves said in the memo. “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.”

Time Warner Cable has complained that CBS programming — like other broadcast TV — is available free online at CBS.com, as well as through streaming subscription services like Netflix and Amazon’s Prime Instant Video.

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

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 the broadcaster — and its local stations have never gone dark because of a retrans dispute over that time.

Separately, TW Cable remains locked in a fight with Milwaukee-based Journal Broadcast Group, also over retrans fees. That led to blackouts of Journal Broadcast’s CBS and NBC affiliates in four markets last Thursday. The operator says the station group is asking for a 200% rate hike, while Journal Broadcast says the increase is only pennies per day per viewer. The companies were continuing negotiations as of Monday.

CBS and other broadcasters are bent on boosting the revenue they earn through retransmission-consent deals. CBS execs are aiming to double the company’s retrans revenue this year to $500 million.

This year retrans payments in the U.S. will reach $3 billion, doubling to $6 billion by 2018, according to estimates by research firm SNL Kagan. Under federal law, TV stations are allowed to demand either payment from pay TV operators for their channels or opt for “must carry,” which ensures distribution but involves no compensation.

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