| July 23
July 23 The CBS broadcast network and
Time Warner Cable, which are battling over the fees the
cable company pays to carry CBS, have taken their fight public
in advertising that risks turning off the very consumers they
need to grow their businesses.
If they do not reach a new deal by Thursday, CBS would go
dark in markets like Los Angeles and New York, depriving viewers
of summer shows such as "Under the Dome" and "Big Brother."
This would add to the challenges that cable companies and
traditional broadcasters already face from competitors such as
Netflix that are making inroads with viewers who can
opt to watch shows online instead of paying for cable
Netflix said on Monday that it had added 630,000 U.S.
streaming video customers in the second quarter of this year.
Cable companies have not yet released quarterly financial
results but the top nine cable operators lost about 264,000
video subscribers in the first quarter, according to Bruce
Leichtman, president of Leichtman Research Group, which tracks
cable and broadband subscribers.
In TV commercials airing in some U.S. markets, Time Warner
Cable accuses CBS of giving New York a "black eye" while CBS
tells consumers in its own spot to "say no to Time Warner
"Anytime you have arguments that result in blackouts, that is
negative for the industry," said Gabelli & Co analyst Brett
Harriss. "It's negative for both CBS and Time Warner Cable."
CBS and Time Warner Cable will eventually settle, as cable
operators and media companies always do out of necessity. Cable
operators need someone to cover the hefty cost of making TV
shows they air and media companies like CBS need the fees they
get from cable companies.
Consumers being bombarded by the marketing campaign know how
it will end: they will pay higher subscriber rates to the cable
operator to carry CBS.
"It's not smart to be rubbing consumers' noses in how much
we pay for something, especially if it's something that could go
away," said Wedbush Securities analyst Michael Pachter.
The industry is mature and not growing. Today, there are 100
million customers paying for television subscriptions through
cable, satellite and telecom companies, according to cable
research firm SNL Kagan. That number has been about flat since
Craig Moffett, an analyst at Moffett Research, estimates
that about 2 million households have cut the cord, or canceled
their video cable service, since 2010.
CBS is also facing challenges to its business model. It is
suing Aereo, the Internet TV service backed by veteran media
executive Barry Diller, for not paying for its broadcast signal.
It is also in court against satellite operator Dish Network
, whose Hopper digital video recorder automatically
skips over commercials.
CBS Chief Executive Leslie Moonves, a former actor, is one of
the media business' toughest negotiators and is playing hardball
with Time Warner Cable.
"If on Thursday our content has been pulled off their
service, you'll know that we are in the midst of a crucial
struggle we intend to bring to a satisfactory conclusion," he
told CBS staffers in a memo.
Time Warner had already encouraged viewers to subscribe to
Aereo to access CBS and other channels for a fee of $8 a month,
none of which goes to CBS.
"Is it really a good idea to intentionally drive customers
to Aereo? What if they liked it too much?" Moffett said.
TV viewers are already all too familiar with blackouts. Last
year alone, there were 91 blackouts, up from 51 in 2011 and 12
the year before, according to the American Television Alliance,
which tracks these disputes.
While there is no evidence that blackouts encourage TV
viewers to cancel cable subscriptions, there are hints of the
damage that can be caused by a blackout of channels. Last
summer, satellite operator DirecTV said its churn, or
rate of cancellations, increased when Viacom's networks
including Nickelodeon and MTV went dark for 10 days.
Christina Wong, a 31-year-old Los Angeles resident who works
in public relations, said she dropped her cable subscription
five years ago and blackouts are among the reasons she would not
"Hearing about all these fights is just bad publicity," said
Wong. "If that was something I'd be paying for, I'd be very