CBS, Time Warner Bury Hatchets
The showdown between CBS and Time Warner over retransmission fees has come to an end at last -- and not a moment too soon. "We're heading to the fall season; football is coming up, and that is always a big issue for viewers," said Colin Dixon, founder of nScreenMedia. "What we experienced this last month could go down to a summer frolic, where the impact was minimized on the customers."
Viewers in New York, Los Angeles and Dallas will be able to watch the US Open tennis tournament and the final episodes of the hit serial-killer drama Dexter on Showtime this week thanks to a new agreement between CBS and Time Warner Cable that ends a monthlong blackout.
CBS programming, which includes Showtime Anytime and video-on-demand services, resumed on Monday at 6 p.m. ET.
"We're pleased to be able to restore CBS programming for our customers and appreciate their patience and loyalty throughout the dispute," said Glenn Britt, Time Warner Cable's chairman and CEO. "While we certainly didn't get everything we wanted, ultimately we ended up in a much better place than when we started."
The specific terms of the deal were not disclosed, but the agreement included retransmission consent for CBS stations on Time Warner systems including the flagship WCBS in New York City as well as the Big Apple's WLYM; KCBS and KCAL in Los Angeles; and KTVT and KTXA in Dallas.
'A Long-Term Impact'
The quarrel originally came about as a result of transmission fees, or the money that cable providers pay to the broadcasters to carry the content.
"Anytime we are forced to pay a lot more for programming, it will have a long-term impact on customers' bills," Maureen Huff, a Time Warner Cable spokesperson, told the E-Commerce Times.
"This was a far more protracted dispute than anyone at CBS anticipated," Les Moonves, president and chief executive officer at CBS, said in a memo to employees on Monday. "But in spite of the pain it caused to all of us, and most importantly the inconvenience to our viewers who were affected, it was an important one, and one worth pursing to a satisfactory conclusion."
CBS did not respond to our request for further details.
'There Is a Limit'
The news "means a return to business as usual for now," said Joel Espelien, senior analyst at The Diffusion Group.
It could also mean "higher prices for consumers and more revenue for both CBS and TWC -- albeit at lower margins in the latter's case," Espelien told the E-Commerce Times.
"There is a limit to how much of this the consumer will accept, but another 50 cents per month -- or thereabouts -- is probably not yet the straw that breaks the camel's back," he added.
The Line in the Sand
As for the timing of the agreement, a look at the calendar is all that's needed to explain that part of the deal. In essence, it was clearly in the interests of both CBS and Time Warner to ensure that the upcoming fall season wasn't affected by a prolonged blackout.
It could be argued, in fact, that Labor Day was where the proverbial "line in the sand' had been drawn.
"We're heading to the fall season; football is coming up, and that is always a big issue for viewers," said Colin Dixon, founder and principal analyst for nScreenMedia. "What we experienced this last month could go down to a summer frolic, where the impact was minimized on the customers."
'A Sobering Consideration'
"With a new season of programming about to start up, it was in both their interests to settle," Dixon told the E-Commerce Times.
Time Warner ended up paying more than they wanted, and CBS accepted less than they desired," Dixon noted.
Not only could that mean higher costs to customers in the long run, but it also paints a bleak picture on the business side.
"Content costs are rising faster than subscriptions," Dixon explained. "It means that pay TV is a lot less profitable than it was 10 years ago. Those margins are simply being eroded, as not all of the content costs are being passed on, and that is a sobering consideration for the business model."
'We Will See More Flexibility'
Instead, the future may bring a more a-la-carte approach to cable, where individuals can subscribe to only the channels they want, for example.
"We're looking at findings where 80 percent of cable TV subscribers say they watch an average of 10 channels and pay an average of $80 a month," Dixon pointed out. "When you're paying $8 per channel, that means Netflix looks like a great deal."
In short, he concluded, "we will likely see more flexibility going forward."