Time Warner Cable And CBS Unable To Reach A Concensus As NFL Nears

by Trefis Team
Time Warner Cable
Rate   |   votes   |   Share

Time Warner Cable (NYSE:TWC) has been battling with CBS (NYSE:CBS) over retransmission rights. It had dropped CBS channels in a number of cities after the two companies failed to reach an agreement over transmission fees earlier this month. CBS’ content is popular and the blackout is expected to add to Time Warner Cable’s woes at a time when it is already facing huge subscriber churn. CBS’ ratings in the past two weeks suggest that the network has been immune to the blackout so far. The cable company on the other hand may face cord-cutting or cord-switching if the dispute is not resolved soon, as the NFL season is about to begin.

See our complete analysis for Time Warner Cable

The Dispute With CBS

Broadcasters charge retrans fees to cable operators for carrying their networks. The retrans agreement between Time Warner Cable and CBS expired in the last week of July, and both haven’t been able to reach a deal thereafter. While Time Warner Cable says that CBS is demanding a 600% premium in the affected markets over what it charges in other cities, CBS has maintained that it is seeking fair value for its content. [1]  CBS recently secured a new retrans agreement with Verizon, which also serves New York, Los Angeles and Dallas through its pay-TV FiOS service, and it maintains that it has offered almost exactly the same deal to Time Warner Cable as offered to other pay-TV providers. [2] 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. It will be interesting to see how and when the dispute ends. The feud has definitely given some room for services such as Aereo to grow more (See – Aereo’s Story).

CBS Remains Immune To Blackout

Interestingly, the CBS blackout has not caused much damage to the network and it continues to rank at the top in terms of viewership.  The network’s popular series and shows including Under the Dome, Big Brother and preseason NFL action carried CBS to primetime victories in key demos last week. [3] CBS is the most watched broadcasting network in the U.S. and has never faced a blackout in its history while Time Warner Cable has a history of more than 50 public disputes and subscriber disruptions. [4] Given the CBS’ advantage of content, the blackout could bring more trouble for Time Warner Cable. However, if the dispute is not resolved before the NFL season kicks off, it may hurt CBS as well. Sports programming is expensive and if CBS is unable to reach the affected 3.2 million viewers of Time Warner Cable, it may impact the pricing for the commercials.

Time Warner Cable May Bleed More Pay-TV Subs

Time Warner Cable has been steadily losing video subscribers for more than four years. In its Q2 2013 earnings, the company witnessed a decline of 191,000 pay-TV subscribers. (Read More – Time Warner Cable’s Pay-TV Business Shrinks But Broadband Is Firm) It has been trying to reduce subscriber churn but a blackout in the key markets won’t help the cause. The situation is more in favor of CBS than for the cable operator.

While the broadband business is driving growth for TWC, pay-TV accounts for more than 45% of its value. In a saturated market, any decline in one’s market share is a gain for the other players. TWC’s subscribers in the affected markets might have waited for the past few weeks for the dispute to end, but the cable operator may soon see cord-cutting or cord-switching in another 10 days when the NFL season begins. NFL has a huge fan base and those unable to watch football games could vent their frustration on the cable-TV provider.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Time Warner Cable blacks out CBS stations for millions as fee spat continues, CNN, Aug 6, 2013 []
  2. CBS Renews Programming Deal With Verizon’s FiOS, The Wall Street Journal, Aug 22, 2013 []
  3. CBS Sweeps Ratings Week With ‘Brother,’ ‘Dome’ and Football, The Variety, Aug 28, 2013 []
  4. Time Warner Cable and CBS Are Scolded Over Blackout, The New York Times, Aug 8, 2013 []
Rate   |   votes   |   Share


Name (Required)
Email (Required, but never displayed)
Time Warner Cable Logo
  • commented 4 years ago
  • tags: TWC CBS DTV
  • Funny that Brighthouse is never mentioned in these articles, but they are also involved in this dispute here in the Tampa area.