Time Warner Cable's CBS Blackout Deadline Moves to Thursday Morning

NEW YORK ( TheStreet) -- Time Warner Cable ( TWC) may remove CBS ( CBS) programming from subscribers in New York, Los Angeles and Dallas by Thursday morning if the two companies fail to agree on a new re-transmission contract.

With a potential CBS blackout looming in those cities, shares of Time Warner rose 1.1% to close at $117.29 while CBS slipped 0.2% to end the trading day at $52.47.

CBS CEO Leslie Moonves, in a memo to company employees obtained by TheStreet, said that Time Warner Cable is refusing to pay the New York-based network a "fair rate" to compensate the company for the cost of producing broadcast shows such as "The Big Bang Theory" and "NCIS." The contract applies only to CBS-owned local television stations in those three cities and smaller areas in other regions where Time Warner Cable has subscribers.

"It's not like Time Warner Cable doesn't have the money," Moonves wrote in the memo. "Cable is a very, very profitable business, and Time Warner Cable can certainly afford to pay CBS a fair rate for our programming without passing any added cost on to its customers."

Moonves added that CBS is paid less than "many cable networks" for its programming even though its shows are among the most popular on television.

The companies' five-year re-transmission agreement expired on June 30, and was extended to July 25 at 9 a.m. New York time to avoid conflict with the rating monitoring scheduled of local stations, a process known as "sweeps."

Time Warner Cable spokeswoman Maureen Huff in a phone interview countered that CBS is making exorbitant demands when compared to fees the cable-TV provider pays CBS-affiliated station owners elsewhere in the country.

"We have offered CBS an increase in their fees," Huff said. "We agree that there is value to their programming but we believe that their demands are not fair to our customers."

CBS has been able to successfully extract higher re-transmission fees from pay-TV affiliates, having generated 62% more revenue in the first quarter from its cable and satellite operators than during the same period a year earlier.

Huff emphasized that viewership is just one factor that the company considers when determining re-trasmission fees. Another is availability and the uniqueness of the programming. CBS programming, Huff said, can also be accessed through the network's Web site in addition to over-the-air transmission with the use of an antennae.

"We don't make any programming decision solely on ratings," Huff said. "It's important to note with CBS that they're a broadcaster and their programming is free over-the-air, their prime-time lineup is free online, and so our customers have other ways of getting this programming."

To that point, Huff said, Time Warner Cable plans to tell its subscribers that CBS programming can also be viewed through Aereo, the upstart online television service that repackages those same free over-the-air signals to subscribers for a fee of $8 to $12 per month.

Aereo, which networks such as CBS have unsuccessfully sought to pay them for their programming, is currently available in New York, Boston and Atlanta with plans to expand to 18 other cities. Broadcasters are suing Aereo, charging that the company is stealing their signal for profit; Aereo counters that it is merely providing viewers a convenient means to access free over-the-air television programming.

The talks between CBS and Time Warner Cable are said to be ongoing yet a blackout of CBS programming in New York, Los Angeles and Dallas could take place on Thursday morning.

"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," said Moonves in his memo to company employees.

Written by Leon Lazaroff in New York

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