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Time Warner Cable blackout of CBS could affect more than a million in LA (updated)

CBS and Time Warner Cable continue to negotiate over subscriber fees and extended a deadline for a deal until July 29. Without a deal, CBS channels in L.A., New York, and Dallas could go dark on Time Warner Cable.
CBS and Time Warner Cable continue to negotiate over subscriber fees and extended a deadline for a deal until July 29. Without a deal, CBS channels in L.A., New York, and Dallas could go dark on Time Warner Cable.
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Time Warner Cable and CBS agreed to push back to Monday, July 29, the deadline to reach agreement in a contract dispute, but if the two companies can’t strike a deal, CBS-owned channels would go dark for Time Warner Cable customers in three cities — including 1.6 million in the Los Angeles area, by one estimate.

That would affect programming on the CBS network, KCAL in L.A. and the premium Showtime channel for those customers who pay extra for it.  

Failure to reach an agreement would also affect customers in New York and Dallas. 

RELATEDCBS, Time Warner Cable spar over fees in NY, LA, Dallas

In their battle over re-transmission fees the cable provider will pay the broadcast network, the two sides appeared far apart, but both agreed it would be less disruptive to keep the channels on. 

"Nobody wants blackouts," said Robin Flynn, senior analyst with SNL Kagan. The firm estimates Time Warner Cable has 1.6 million subscribers in the Los Angeles market. 

"It draws a lot of attention and leads to lost revenue on both sides," said Flynn.  

Like many analysts, Flynn believes CBS — which wants to raise the per-subscriber fees Time Warner Cable pays to carry the local stations — has the stronger position in the dispute.  

Fiercely competitive

In markets like Los Angeles and New York, the TV distribution business is fiercely competitive. Time Warner Cable faces not only satellite companies such as DirecTV and Dish, but also offerings such as Verizon Fios and AT&T's U-verse.  

"To not have a key component of the programming package puts you at a significant disadvantage," said David Bank, media analyst with RBC Capital Markets. CBS is currently the number one broadcast network in the U.S. 

But Bank believes CBS could also be hurt by a blackout. “Short term, there’s greater pain for CBS,” Bank said.  

He estimates that if its channels were blacked out in New York, L.A. and Dallas, CBS would lose 3 percent of its national audience at the network level, which is important with advertisers.  That would have “some short term impact on earnings,” though not a massive one, said Bank.

The summer is the most vulnerable time for a broadcaster like CBS, which doesn't have a baseball package and is mainly airing reruns.  But if a blackout continued into the fall, Time Warner Cable would feel even greater pain, said Bank. 

“Once the NFL season starts, I really don’t think you can be a major cable system without being able to carry the NFL games on CBS,” Bank said. Time Warner Cable would risk losing hard-earned subscribers, which are more expensive to add than they are to retain.

 What happens if CBS goes dark?

If the CBS channels go dark, Time Warner Cable customers in the Los Angeles area would have to try to watch them using an old-fashioned antenna. Episodes of CBS shows like "Under The Dome" are available at the CBS website.  Showtime is warning viewers on its website that Time Warner Cable could suspend its channels.

Time Warner Cable threatened Wednesday to take CBS stations out of  the number 2 slot on the Time Warner Cable dial and sell the prominent slot to another programmer. That would mean its Los Angeles viewers looking for what they have known as "CBS-2" would be in a different location on their cable system.  

"If you move one of the broadcast stations from its legacy channel position that happened to be equivalent to its over-the-air channel position for multiple generations of viewers, it's going to be confusing for the consumer," said Bank.

Time Warner Cable CEO set to retire

Meanwhile, Time Warner Cable says its chairman and CEO Glenn Britt will retire at the end of 2013.

The company's board elected Robert Marcus to succeed him. Marcus is the company's president and chief operating officer.

The 64-year-old Britt became CEO of the cable company in 2001. He led the company through many technological changes, such as the addition of high-speed internet and Video on Demand. He also oversaw the company's emergence as a publicly traded company. It is one of the nation's biggest cable companies with 15 million customers.

Following his retirement, Britt will remain on the board, but take a non-executive role.

The 48-year-old Marcus joined Time Warner Inc. in 1998 and moved to Time Warner Cable in 2005. He was named chief financial officer in 2008. He worked with Britt during its 2009 spin-off from Time Warner Inc.

This story has been updated.