Time Warner Blackout of CBS Goes Into Second Day

By Tom Krisher

Time Warner Cable's ( TWC) blackout of CBS ( CBS) continued Saturday, and neither side indicated a resolution of their dispute over fees was imminent.

Time Warner dropped CBS on Friday in New York, Los Angeles, Dallas and several other cities, leaving 3 million customers without the network's programs. The issue is fees that the cable company pays CBS to air its programs.

Each has accused the other of making unreasonable demands. On Saturday the two sides even seemed to disagree on the status of negotiations. A Time Warner spokeswoman said Saturday that negotiations were ongoing. CBS said that it expected talks to resume soon but that the decision rested with Time Warner.

Without a deal, Time Warner customers were missing Tiger Woods' attempt at his eighth victory at Firestone Country Club near Akron, Ohio, in this weekend's Bridgestone Invitational. Woods held an 8-stroke lead through seven holes on Saturday. CBS fans also won't see such programs as Under the Dome or 60 Minutes.

Time Warner cut off the CBS shows as well as cable networks Showtime, TMC, Flix and Smithsonian. The cable company's customers are caught in the middle, and the stakes will only go higher. CBS will air the PGA's final major tournament starting Thursday, and its preseason National Football League coverage begins on local stations next week.

Late Friday night, Time Warner posted a message to subscribers on its website from CEO Glenn Britt saying that CBS has been "uncompromising" by making demands that are inconsistent with deals made with hundreds of other broadcasters. If Time Warner gives in to CBS' demands, he said, then other programmers will ask for more as well.

"Cable TV bills would skyrocket," Britt wrote. "You'd be mad. We'd be mad. It won't end well for anyone."

One industry analyst estimates that CBS got 75 cents to $1 per Time Warner subscriber in the contract that recently expired.

CBS said this is the first time it has been dropped by a cable system, and it has successfully negotiated deals with Comcast, Cablevision, Charter, DirecTV, AT&T, Verizon and other companies.

"CBS programs are among the most popular in the industry, and yet there are many cable networks -- with considerably less viewership -- that receive more money for their programming from Time Warner Cable than we do," CBS CEO Leslie Moonves said in a July memo to employees.

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.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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