CBS (NYSE:CBS) and Time Warner Cable (NYSE:TWC) announced a deal on Monday to end a month long dispute over retransmission fees that caused CBS programming to be blacked out for around 3.2 million Time Warner Cable subscribers in New York City, Dallas and Los Angeles. It was anticipated that the dispute would end before the NFL football season kicks off due to its popularity. CBS estimated the blackout to impact the network’s national viewership by about 1% and Nielsen estimates suggest that the network has largely remained immune to the blackout. In the dispute, CBS reportedly was seeking to double its retransmission fee from $1 to $2 per month for every Time Warner Cable subscriber in the affected cities. While the financial details of the deal were not disclosed, CBS had an upper hand due to the advantage of its content.
End To A Month Long Dispute
The retransmission contract between the two companies expired in the last week of July, but both the companies couldn’t reach a deal in August. Time Warner Cable said that CBS was demanding a huge premium in the affected markets over what it charges in other cities. However, CBS had maintained that it was seeking fair value for its content and it had recently signed a deal with Verizon with similar prices as offered to Time Warner Cable.  After about a month of discussions, the blackout has finally ended and CBS has stated that they are receiving fair compensation for its content and that it also has the ability to monetize the content on the newer platforms. Time Warner Cable on the other hand also obtained access to the CBS material for on-demand or mobile device viewing.
CBS’ Advantage Of Content
The growing number of delivery platforms for video content has led content owners to demand a much larger share payout of the pay-TV opportunity. CBS saw a 16% jump in affiliate and subscription fees to $1.07 billion in the first half of this year primarily driven by revenues from a pay-per-view boxing event, growth in retransmission revenues and network affiliation fees.  As far as the ratings go, the network was immune to the blackout due to the higher viewership for its popular series and shows including Under the Dome, Big Brother and preseason NFL action that carried CBS to primetime victories in key demos for the month of August. 
Overall, broadcast retransmission fees has surged from $500 million in 2008 to an estimated $2.4 billion in 2012, and is expected to reach $6 billion by 2018.  While the content owners spend heavily on original programming and sports coverage, pay-TV operators find it hard to push the high costs to the end customers. Clearly, media companies have been riding high on the increasing demand for content and have an upper hand over the cable and other MSOs (multi service operators). It will be interesting to see how this deal sets a roadmap for future retransmission agreements between pay-TV operators and content owners.Notes: