What about Milwaukee? Time Warner Cable's Other Blackout Enters 6th Week

NEW YORK ( TheStreet) - Enough with New York and Los Angeles. What about Milwaukee?

Time Warner Cable ( TWC) has sufficiently resolved its differences with CBS ( CBS) but the same can't be said for Milwaukee-based Journal Communications.

Time Warner Cable subscribers in Milwaukee, Green Bay, and Palm Springs, Calif., where Journal Communications owns the local NBC affiliate, haven't had access to that station for six weeks. The same goes for a Journal-owned CBS affiliate in Omaha.

Already, three Green Bay Packers preseason games, normally carried by Journal Communications' NBC station, have been blacked-out to Time Warner Cable subscribers in Milwaukee and Green Bay, and tonight's Denver Broncos-Baltimore Ravens game, a rematch of last year's divisional playoff, could be the next victim.

Journal Communications investors have been hurt in the process. Shares of the company, which also publishes the Milwaukee Journal Sentinel and owns network-affiliated TV stations in Tucson, Las Vegas, Fort Myers, Florida and Lansing, Michigan, have lost 22% since the blackout began on July 25. By comparison, the S&P 500 has dropped 2.1% during that same period. Journal Communications fell 1.4% on Thursday to $7.24.

At the center of the fight are many of the same issues that pushed Time Warner Cable and CBS into a four-week blackout: fees the cable-TV provider must pay television-station owners, and digital rights, the freedom the cable-TV provider has to repackage that programming for on-demand services.

Time Warner Cable's decision to go to battle against two station-owner groups - CBS and Journal Communications - underscores its unhappiness, or better said, complete frustration with the 1992 Cable Television Protection and Competition Act. That law requires cable-TV and satellite operators to pay broadcasters before carrying their programming.

To illustrate this frustration, Time Warner Cable spokesman Jon Herrera pointed to the retro-designed Web site of his industry's American Television Alliance, which exclaims in bold lettering that "This Site Is Just Like Our TV Rules STUCK IN THE '90S." And then, in a nod to Nirvana, adds the banner "Smells Like Outdated: 1992 rules are stinking up the video industry."

"We have said from an industry standpoint that there should be some review of the rules surrounding this process, and the regulatory process involving re-transmission consent," Herrera said in a Sept. 5 phone interview from San Antonio. "We're trying to balance the playing field. This discussion with Journal Communications is about the fees and the new fees that they're asking for are just an outrageous increase."

Time Warner Cable, along with other pay-TV operators, has asked the Federal Communications Commission and Congress to re-open the 1992 Act, Herrera said. For starters, cable-providers would like to eliminate the rule that requires them to negotiate with the one broadcast affiliate in each viewing region. Instead, Time Warner Cable would like the option of negotiating with whichever NBC-affiliate might give them the best re-transmission deal.

Journal Communications, of course, takes a wholly different view. Jim Prather, who heads the Journal Broadcast Group, said cable-TV operators don't give broadcast television enough credit, and money, for their programming. Prather, citing the National Association of Broadcasters, says the broadcast-stations led by CBS, Comcast's ( CMCSA) NBC, Disney's ( DIS) ABC and 21st Century Fox's ( CBS) flagship station receive only 6.5% of total re-transmission fees yet supply about 40% of all weekly viewing on pay-TV.

"Local broadcasters are a substantial piece of establishing the credibility of cable and satellite operators," Prather said in an Aug. 29 phone interview from Las Vegas. "We're getting this heavy volume of viewing, and they're reselling our signal to get to their average unit price of $120 in Milwaukee. We're just asking for a small portion of that."

From Time Warner Cable's point of view, re-transmission fees have been rising too fast. CBS has a goal of reaching $1 billion in fees by 2017 and Morgan Stanley analyst Benjamin Swinburne says they'll do that and more. CBS's re-transmission revenue jumped 62% in the second quarter over the same period a year ago.

Eager to find some leverage, Time Warner Cable has intimated to Journal Communications that its NBC-affiliate could lose its long-held channel spot (#4) on subscribers' local Milwaukee TV dial, if stumbling blocks can't be removed. The same not-so-veiled threats were made to CBS about its #2 channel position in New York, which it subsequently retained.

If the Journal Communications blackout does extend beyond Sunday, Time Warner Cable subscribers in Wisconsin won't be receiving the New York Giants game versus the Dallas Cowboys on NBC. That might create some backlash given that professional football remains the most-watched of all TV programming.

Of course, in Milwaukee and Green Bay, it's all about the Packers, which Herrera was quick to acknowledge. A blackout of the Packers' Oct. 27 game against the Minnesota Vikings could prompt a local insurrection.

Herrera says the talks are still ongoing.

-- Written by Leon Lazaroff in New York

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>News stories and columns by Leon Lazaroff .

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