The Breakdown

Explaining Southern California's economy

Time Warner CBS deal: Who won, who lost. Did you?

31955 full
31955 full

Now that CBS and Time Warner Cable have reached an agreement to end a blackout of CBS channels and Showtime in Los Angeles, New York and Dallas, industry analysts and cable customers are left wondering who won and who lost in the battle between the media giants.  Few details of the agreement were included when the deal was announced on Monday.

The blackout affected more than 3 million Time Warner Cable customers nationwide, leaving them without CBS-owned channels, Showtime, and others without the Smithsonian channel for more than a month.  Roughly half of those customers were in the Los Angeles market.  

Here's a rundown of what CBS won:

  • Higher retransmission consent fees. Time Warner Cable said it was always willing to pay more than the 80 cents per subscriber it was estimated to be paying in the expired contract. But analysts figured CBS wanted closer to $2 per subscriber, and many believe the broadcast network got that – or close to it. 
  • Digital rights. In an email announcing the agreement to staff, CBS CEO Les Moonves wrote, “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."

What did Time Warner Cable win?

  • Attention from federal regulators and the general public to the rising costs of content.  Outgoing Time Warner Cable CEO Glenn Britt’s statement was far less triumphant than Moonves’ email, but focused on the legal and backdrop to the dispute:

"While we certainly didn’t get everything we wanted, ultimately we ended up in a much better place than when we started. We are also encouraged by the 50+ consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules. The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love.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.

What about viewers?

“We’d like to say ‘welcome back’ to all of our Time Warner viewers,” KCAL-9 anchorwoman Sandra Mitchell said in a news broadcast shortly before 5 p.m. on Monday. The broadcast followed the Los Angeles Dodgers victory over the Colorado Rockies.  

The game was already underway when the deal was announced, so Time Warner Cable customers in Los Angeles missed a lot of it, just as they missed Dodger games in August that were broadcast only on KCAL.  

“It comes just in time for the new TV and NFL seasons,” Mitchell said of the agreement. “We’d also like to take a moment to thank you for your patience,” she concluded. 

Dispute over consent

The dispute was initially over retransmission consent, or the fees that Time Warner Cable must pay to carry CBS-owned channels.  CBS also wanted to keep the digital rights to its programming, so it could sell content to distributors such as Netflix and Amazon. 

“I think the big bugaboo on this one was how digital rights were going to work,” said media consultant and investment advisor Chris Bevilacqua.  “Who was going to have access to the customer through iPads and smartphones and all of the non-linear consumption that’s going on in the world of digital today.” 

Neither CBS nor Time Warner Cable disclosed the terms of the agreement, but both indicated it was worth fighting for.  Most analysts agree that CBS always had the upper hand in the negotiations and that it was only a matter of time before Time Warner Cable would have to give in. 

A week into the blackout, Mignon Clyburn, Acting Chairwoman of the Federal Communications Commission, threatened to intervene, but the agency remained largely on the sidelines. 

"I am pleased CBS and Time Warner Cable have resolved their retransmission consent negotiations,  which for too long have deprived millions of consumers of access to CBS programming,” Clyburn said in a statement after the agreement.  "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."

Robin Flynn, Senior Analyst with SNL Kagan, said that while CBS won on the financial score card, Time Warner Cable scored important points on the political one. 

“TWC's resolve in major markets and through some major golf and tennis events did leave one of the strongest statements yet that in the last three or four years, the annual growth in content costs is increasingly untenable and the ecosystem is at or beyond a breaking point,” Flynn says. “Also, TWC once again got the attention of regulators at local and national levels.” 

blog comments powered by Disqus

Enjoy reading The Breakdown? You might like KPCC’s other blogs.

What's popular now on KPCC