Bloomberg News

CBS Pressures Time Warner Cable With Verizon FiOS Agreement (1)

August 23, 2013

CBS Pressures Time Warner Cable With Verizon FiOS Agreement

A field technician for Time Warner Cable Inc. holds a spool of coaxial cable in Manhattan Beach, California. Photographer: Patrick Fallon/Bloomberg

CBS Corp. (CBS:US) reached a three-year agreement to keep its network on Verizon Communications Inc. (VZ:US)’s FiOS pay-TV system, putting pressure on Time Warner Cable Inc. (TWC:US) to relent in its stalemate with the broadcaster.

The contract with FiOS is “almost exactly the same deal” offered to Time Warner Cable, giving Verizon customers access to CBS in cities including New York, Los Angeles and Dallas, CBS Chief Executive Officer Les Moonves wrote yesterday in a memo to employees. It also includes moving CBS Sports Network to a broader tier that will increase distribution for the channel, Moonves said. Financial terms weren’t disclosed.

Time Warner Cable began blacking out CBS in New York, Los Angeles and Dallas almost three weeks ago after negotiations between the companies came to an impasse.

“I cannot describe to you the frustration I feel at the way these negotiations have gone,” Moonves said. “Never in my most pessimistic moments did I ever think that they would have lasted this long and have been so difficult. In many aspects of the deal, Time Warner Cable is demanding different terms than any other company in the business. I am frankly mystified by what appears to be a lack of urgency to resolve this matter for their customers.”

Time Warner Cable spokeswoman Maureen Huff declined to comment on Moonves’s note. Moonves reiterated CBS would keep talking to Time Warner Cable, the second-largest U.S. cable provider. The duration of the blackout surpasses the two-week shutdown of Fox on Cablevision Systems Corp. (CVC:US), a similar clash in 2010.

Fees Rising

Verizon will pay CBS retransmission fees of $1.50 a household in 2014, rising to $1.90 a home in 2016, Michael Morris, an analyst at Davenport & Co. in Richmond, Virginia, estimated yesterday in a report. CBS will receive $461 million in fees from pay-TV systems and from its affiliates this year, Morris wrote. That will rise to $639 million next year as the company continues to negotiate new agreements with distributors, he said.

The Verizon estimates from Morris are too high, Bill Kula, a spokesman for Verizon, said in an interview. He wouldn’t provide specifics.

“Given the popularity and ratings of CBS hit programming, including premier sporting events and the NFL, the company is justified in raising its rates to a more market-comparable level,” wrote Morris, who recommends CBS shares.

CBS was little changed at $52.73 at 9:49 a.m. in New York. The shares had climbed (CBS:US) 39 percent this year through yesterday. Verizon rose 0.5 percent to $47.24 and Time Warner Cable fell 1 percent to $107.92.

Antenna Offer

Time Warner Cable said today it has a limited amount of indoor antennas customers can pick up from its stores to get CBS over the air. It also will offer $20 toward the purchase of an antenna at Best Buy Inc. stores, it said in a post on its website that was reported earlier today by Variety.

The National Football League, the most popular sports league in the U.S., begins its season Sept. 5, with the first CBS games airing Sept. 8 -- a date looming over the negotiations with Time Warner Cable.

Verizon has about 5 million TV customers (VZ:US). Most of them are in the three markets affected by the blackout at Time Warner Cable, Moonves said. Verizon has more customers than Time Warner Cable in those markets, he said.

Temporary Reprieve

Time Warner Cable and CBS have agreed to temporarily lift their blackout in New York City for as many as three political debates, Huff said. Those include one tonight between the Democratic primary’s comptroller candidates; a Republican mayoral debate on Aug. 28; and a debate, if necessary, between Democratic mayoral runoff candidates on Sept. 23. No other programming will be affected.

Time Warner Cable, based in New York, is offering a free preview of the Tennis Channel to customers who can’t get CBS during the U.S. Open because of the contract dispute.

Digital basic-cable customers in New York, Los Angeles, Dallas and other regions without CBS will get 75 hours of live matches plus additional coverage on the Tennis Channel for no additional charge, Time Warner Cable said in an Aug. 21 statement. The network isn’t normally available on basic cable.

“We know the U.S. Open is popular programming,” Mike Angus, Time Warner Cable’s senior vice president and general manager of video, said in a statement. “We’re pleased to be able to offer additional programming via Tennis Channel to customers affected by this dispute.”

CBS has exclusive TV coverage of the tournament’s later matches, including the men’s and women’s singles semifinals and finals. Live matches are also available on ESPN2, CBS Sports Network and USOpen.org.

“The only way to watch CBS’s coverage of the U.S. Open on television is on CBS,” the New York-based broadcaster said in an e-mailed statement.

The U.S. Open begins Aug. 26 and ends Sept. 9. It is the last of tennis’s four major championships, including the Australian Open, the French Open and Wimbledon.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net


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Companies Mentioned

  • CBS
    (CBS Corp)
    • $60.3 USD
    • 1.13
    • 1.87%
  • VZ
    (Verizon Communications Inc)
    • $47.1 USD
    • 0.18
    • 0.38%
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