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Big Blackout Looms as CBS, AT&T Go Down to Wire on Renewal Talks

A blackout affecting CBS stations in major markets throughout the country looms as CBS and AT&T executives go down to the wire on negotiations for a retransmission consent deal covering 28 O&O stations.

The sides have sparred publicly during the past few days as 11 p.m. PT Friday expiration of the previous contract approached. AT&T has accused CBS of seeking exorbitant increases in a new deal, while CBS has blasted AT&T for failing to pay market rates as set by its comparable deals with other sizable MVPDs. It’s understood that executives from CBS and AT&T have been in a huddle today at DirecTV headquarters in El Segundo.

If the CBS and CW-affiliated stations go dark, the blackout would affect about 6.6 million subscribers of AT&T’s DirecTV and U-verse platforms, which reach a total of 22.4 million subscribers. The contract set to expire soon also covers the CBS Sports and Smithsonian cable channels. CBS’ entertainment cablers — Showtime and Pop — are carried under a separate contract and not at risk of a blackout.

A shutdown would also affect the streaming DirecTV Now platform, which would mean loss of carriage for the O&Os plus another 100 CBS affiliate stations. CBS’ independently owned affiliate stations have largely banded together to negotiate retrans deals with the new breed of virtual MVPDs a la DirecTV Now, Hulu and YouTubeTV. As such, a majority of CBS’ affiliate stations are covered for DirecTV Now under CBS’ master agreement with AT&T. DirecTV Now at present has about 1.5 million subscribers.

A CBS blackout would also come on the heels of the shutoff of Nexstar Media Group station signals on AT&T platforms because of retrans wrangling. That blackout covers dozens of CBS affiliate stations owned by Nexstar. An extended loss of coverage for CBS on AT&T’s national platforms would be a hit to the Eye in ratings and advertising revenue, while AT&T runs the risk of alienating its high-end traditional subscribers at a time when consumers have more options than ever for MVPD-like channel bundles.

AT&T issued a lengthy statement Friday that took aim in part at the CBS All Access streaming service. It also said CBS balked at giving AT&T expanded video on demand rights to current network programming, which is a key feature of CBS All Access.

“We have offered to pay CBS an unprecedented rate increase and the highest fee we currently pay to any major broadcast network group.  CBS has refused. We also asked CBS to allow us to sell its CBS All Access streaming service,” AT&T said. “Again, CBS refused even though CBS already allows our competitors like Roku and Amazon to market that stand-alone offering. The reason for CBS’ refusal is because CBS and other companies that own local CBS affiliates – such as Nexstar, Tribune and Sinclair – want to limit customers’ choices so broadcasters can keep using blackouts to cut off consumer access and inflate their fees. Either way, consumers lose.”

CBS’ is understood to be pushing for a sizable rate hike in part because the previous deal with DirecTV was completed in 2012, when the pay-TV marketplace was far less competitive. CBS has maintained in its talks with AT&T that it has been consistent with other traditional MVPDs on the level of VOD access offered and in granting the rights to market CBS All Access subscriptions.

“AT&T’s willingness to deprive its customers of valuable content has become routine over the last few weeks and months, and recent negotiations have regularly resulted in carriage disputes, blackouts and popular channels being removed from their service,” CBS Corp. said in a statement issued Tuesday.

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