CBS, Time Warner Cable Reach Deal to End Blackout

Moonves: 'We are receiving fair compensation for CBS content'

The month-long carriage standoff between CBS and Time Warner Cable has ended as the sides unveiled a wide-ranging content deal that calls for CBS network, Showtime and other channels blacked out since Aug. 2 to return to TW Cable systems as of 6 p.m. ET Monday.

Financial details of the pact were not released. But a memo to CBS staffers from Eye chief Leslie Moonves indicated that CBS prevailed in one of the major sticking points in the talks, namely the Eye’s ability to strike domestic subscription VOD deals for CBS and Showtime content with the likes of Amazon, Hulu and Netflix.

CBS had sought a fee of about $2 per subscriber per month for the retransmission consent rights to its CBS O&O stations covered under the deal, up from between 75 cents and $1 previously, according to analysts. Nobody was talking specifics on Monday, but it’s understood that the price tag stayed below $2 a sub at the outset while it will come close to the two-buck benchmark by the end of deal term, which is said to run about five years.

“The final agreements with Time Warner Cable deliver to us all the value and terms that we sought in these discussions,” Moonves wrote. “We are receiving fair compensation for CBS content and we also have the ability to monetize our content going forward on all the new, developing platforms that are right now transforming the way people watch television.”

TW Cable chief Glenn Britt maintained that the cable operator had been able to temper CBS’ financial demands in the negotiations.

“As in all of our negotiations, we wanted to hold down costs and retain our ability to deliver a great video experience for our customers,” Britt said in a statement. “While we certainly didn’t get everything we wanted, ultimately we ended up in a much better place than when we started.”

SEE ALSO: CBS-TW Cable Brawl: Politicians, Pundits Advance Their Own Agendas

The Labor Day accord brings to an end the longest blackout for a Big Four O&O group stations in major markets in the 20 years since the FCC’s retransmission-consent rules mandated that cable operators negotiate with station owners for carrying local signals.

Showtime and CBS’ other cable assets also became leverage points in the retrans talks with TW Cable, as is common in retrans talks for diversified media congloms.

The blackout of the Eye’s O&O stations affected more than 3 million TW Cable subscribers in New York, Los Angeles, Dallas and other markets. Immediately after Time Warner Cable removed the stations Aug. 2, CBS blocked all of the MSO’s broadband subscribers from accessing full episodes on CBS.com and mobile apps — a move that drew sharp criticism from politicos and consumer-advocacy groups, besides irritating TW Cable customers.

The loss of Showtime, Smithsonian Channel and two other cablers was system-wide across Time Warner Cable’s 11.9 million subscribers and also customers of Bright House Networks, which has a deal to piggyback on TW Cable’s programming agreements. (During the blackout, the cable company continued to carry CBS Sports Network, which was covered under a separate deal.) Showtime is said to benefit significantly from the new pact, which also brings expanded distribution for Smithsonian and CBS Sports Network.

TW Cable, in turn, gets expanded VOD rights for Showtime and CBS programming, including access to Showtime Anytime, the premium network’s version of TV Everywhere that streams content to an array of Internet-connected devices. In fact, fans of CBS’ summer hit “Under the Dome” should be able to catch up on the five most recent episodes of the show on VOD “as soon as (TW Cable) can get the episodes up on their system,” according to a CBS rep.

Industry observers expected the sides to reach an agreement by this week in preparation for the formal start of the NFL season. As always, CBS’ carriage of AFC football games was a key leverage point in the talks. Sources said CBS’ coverage of the U.S. Open Tennis Championships tournament, which heads into its final rounds this week, was also a pressure point, particularly in the Gotham market where TW Cable is the dominant cable provider (and a lead sponsor of the tennis tourney).

TW Cable may have “scored some points in policy circles by raising attention about the asymmetry of these kinds of disputes,” but with the approaching NFL season the operator “ultimately had no choice but to settle,” Moffett Research principal Craig Moffett said in an email. “We may never know the final terms, but you can be sure that the settlement was ultimately a lot closer to CBS’ ask than to TWC’s bid.”

The saber-rattling on the deal began more than two months ago, as the initial July deadline for a deal approached. Both sides employed the now-familiar weapons in a carriage agreement, with dueling newspaper and radio ads as well as websites making the case to consumers why the other side was being unreasonable.

SEE ALSO: Time Warner Cable Will Credit Showtime Subs for Blackout, But Nothing for Loss of CBS

CBS, like other broadcasters, insisted that it should be paid sub fees commensurate with top cable networks because the Eye ranks among the most-watched channels on TW Cable’s lineup. TW Cable accused the Eye of holding viewers hostage while it sought fee hikes that it claimed were 600% more than what it pays CBS affiliates in other parts of the country.

Retrans wrangles that spill over into the public eye have become more commonplace in recent years, as major station owners began demanding significant cash in retrans deals. The global financial meltdown of the 2008-2009 period walloped the local TV advertising market, which spurred the largest station group owners to focus on alternate sources of revenue.

Negotiations between CBS and TW Cable execs continued pretty steadily throughout the long blackout. The final details were sewn up during the holiday weekend in a flurry of conference calls and email exchanges, sources said.

Moonves, in his memo, cited Eye chief operating officer Joe Ianniello and CBS TV Distribution prexy Ray Hopkins as the drivers of the dealmaking. TW Cable is in the midst of a management shuffle as Britt is retiring at year’s end. His successor, Rob Marcus, played the role of closer as the sides zeroed in on an agreement late last week.

Britt in his statement continued his call for the FCC to overhaul its retrans rule, arguing that it gives broadcast TV station owners too much leverage to pull signals in negotiations.

“We are also encouraged by the 50-plus consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules,” Britt said. “The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love.  We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon.”

Acting FCC chairwoman Mignon Clyburn avoided wading into the dispute, even as it dragged on. At present, the FCC — according to its interpretation of the 1992 Cable Act — has little authority to intervene into private business negotiations, unless one side files a formal complaint that the other is not dealing in good faith.

“At the end of the day, media companies should accept shared responsibility for putting their audience’s interests above other interests and do all they can to avoid these kinds of disputes in the future,” Clyburn said in a statement Monday.

SEE ALSO: Time Warner Cable Subscribers Sue Over CBS, Showtime Blackout

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