The fight could be a long one with CBS trying to gain revenue from retransmission fees to buffer against cyclical swings in advertising revenue and Time Warner caught in a competitive environment that limits price increases to pay for rising programming costs.
Research firm SNL Kagan estimates retransmission fees paid to programmers will reach $3 billion industrywide this year and double to $6 billion by 2018.
Earning revenue from pay TV subscribers is crucial to the growth prospects of CBS, analysts say. Even though CBS sends its signal out over the airwaves for free to anyone with an antenna, about 85 percent of its viewers watch TV through a pay TV provider.
Time Warner Cable is fighting to hold the line on costs as it struggles to keep subscribers. It lost 191,000 cable TV subscribers in the most recent quarter, ending with 11.7 million at the end of June.Still, both companies posted healthy quarterly earnings this week. Time Warner Cable grew its net income 6 percent to $481 million, or $1.64 per share, as revenue rose 3 percent to $5.6 billion. CBS grew net income 11 percent to $472 million, or 76 cents per share. CBS' revenue also grew 11 percent to $3.7 billion thanks in large part to the fees that are in dispute with Time Warner Cable. The CBS stations that went dark are WCBS and WLNY in New York; KCBS and KCAL in Los Angeles; KTVT and KTXA in Dallas; WBZ and WSBK in Boston; KDKA, WPCW-CW in Pittsburgh; KCNC in Denver; WKBD-CW in Detroit and WBBM in Chicago. About 2.5 million Time Warner Cable customers lost access to Showtime, the premium channel that carries such programs as Dexter. Time Warner said it would temporarily replace lost programming with shows from Starz Kids and Family.
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