By Liana B. Baker

Sept 3 (Reuters) - Cable and satellite customers beware. Prepare for more blackouts of major stations and keep a close eye on that cable bill.

The cost of a deal announced Monday between Time Warner Cable and CBS, that ended a month-long blackout of the main CBS channel and its Showtime cable offering in New York and Los Angeles, is likely to be passed onto the consumer.

And as video programming costs climb across the board, there are likely to be many similar disputes leading to a disruption of service in various parts of the country.

This year so far, there have already been blackouts in 80 markets, putting cable and satellite companies on a path to beat last year's count of blackouts in 91 markets, according to the American Television Alliance, which tracks such disputes.

The broadcaster usually wins. Time Warner Cable's fees for CBS channels and programming will likely triple over the next few years, media analysts said. Time Warner Cable's blacking out of CBS channels slowed but didn't significantly curb the retransmission fees that CBS was seeking, they said.

The two sides came to an agreement only four days before the start of the highly popular National Football League's regular season. CBS has rights to broadcast top games on Sunday afternoons.

Time Warner Cable's hard line could embolden other players to be just as aggressive at dropping popular channels, said Barry Parr, an analyst at research firm Outsell who follows the television industry.

They may have little choice. Video margins for cable companies have been shrinking. Barclays' analyst Kannan Venkateshwar estimates video programming costs grew to 44 percent of operators' video revenue in 2012 from 35 percent in 2005.

The squeeze has gotten so intense that Time Warner Cable's recent standoff prompted supportive statements from satellite operator DirecTV, which usually would see a blackout as a chance to poach subscribers.

Terms of the CBS-Time Warner Cable dispute were not disclosed but analysts estimate CBS secured the $2 per subscriber fee per month it was aiming to get for its broadcast network from about 56 cents. That will only spur other broadcasters such as Fox, Walt Disney Co's ABC and Comcast's NBC to seek large increases of their own when contracts come up.

"There is a new template here. Two dollars is the new holy grail," said Wunderlich Securities analyst Matthew Harrigan.

He estimates Fox currently pockets close to $1.25 per month per subscriber on average, while ABC receives 50 to 65 cents and NBC less than that.

Time Warner Cable will likely be forced to raise prices early next year to make up for the increased costs of the CBS deal, Harrigan said.


Cable bills are already rising faster than inflation. Craig Moffett, an analyst at research firm MoffettNathanson LLC estimates the monthly cost of a TV subscription has increased 32 percent over the past five years.

In July, subscription services for cable, satellite and radio rose 2.4 percent year over year, according to the Bureau of Labor Statistics. By comparison, the overall U.S. Consumer Price Index rose just 1.7 percent over the same period.

The next potential brawl will likely pit Dish Network , which last year blacked out the AMC channel and its hit shows "Mad Men" and "Breaking Bad" for more than three months last year, against Walt Disney. Disney's channel lineup includes sports network ESPN, the most expensive on the dial.

The agreement between Dish, which has 14 million subscribers, and Disney expires this fall.

Dish officials did not respond to a request for an interview, but on an Aug. 1 conference call with analysts Dish Chairman Charlie Ergen said he was optimistic the two sides would reach a deal.

Still, Ergen threatened to drop Disney channels.

"If we get that deal we'll do it," said Ergen. "If we don't get that deal we'll part ways. Simple as that," Ergen said.

Rising programming costs are no thrill for consumers such as Justine Fowler, a 26-year-old advertising account executive in New York, who signed up for Time Warner Cable's video and Internet service in early September after she moved to Brooklyn from Manhattan.

She would consider cancelling her subscription, which costs more than $100 per month for cable and Internet at a promotional rate, she said, if she did not want to watch the games of her favorite NFL team, the New England Patriots.

"Having cable and the bills associated with it can be overpriced when you get can get basically the same alternative with Hulu and Netflix," Fowler said in reference to two of the most popular online streaming companies.

The specter of rising costs during the Time Warmer Cable-CBS standoff prompted calls for the Federal Communications Commission to intervene. While the FCC released statements saying it was monitoring the situation, it showed it had little power to end the fight, said David Wittenstein, a communications attorney at the firm Dow Lohnes who has handled similar negotiations between cable companies and broadcasters.

"The FCC showed they are going to limit their activities to getting on the phone with the parties and urging them to reach an agreement," he said.

For many cable and satellite consumers that means higher prices may well be just one more blackout away. (Reporting by Liana B. Baker in New York and Lisa Richwine in Los Angeles; Additional reporting by Dan Burns; Editing by Ron Grover and Tim Dobbyn)

Loading Slideshow...
  • Crackle

    <a href="" target="_hplink">Crackle was bought by Sony in 2006</a> (when it was a startup called Grouper), and now its <a href="" target="_hplink">streaming-only movie and TV library </a>features mostly Sony productions. It is free to watch, and you don't have to register, but you do have to sit through advertisements that break up your movie. The options are fairly limited right now--there are about 250 full-length movies and episodes from 50 TV shows, though apparently Crackle adds about 10 of each every month. The quality of the options is pretty good, however; I've been watching "Pineapple Express" since lunch, and I'm moving on to the original "Bad Boys" when that's done. The stream looks great at 480p on my laptop, though would probably pixellate on a television screen. <strong>PROS</strong>: Totally free, no registration required; varied quality options; user-friendly website design; good picture on laptop for free service; free iPhone, iPad and Android app. <strong>CONS</strong>: Ads, ads, ads; limited quantity of movies and especially TV shows; no DVD rental option.

  • Vudu

    A startup founded in 2004 and <a href="" target="_hplink">purchased by Wal-Mart</a> in 2010, <a href="" target="_hplink">Vudu is a movie-streaming service</a> that prides itself on two key features: first, it has a database of high definition, 1080p movies that is larger than any other website's; and second, it is accessible on any device that connects to the Internet, from PlayStation 3s and Blu-Ray Players, to laptops and Internet-enabled TVs. Vudu is compatible with over 300 devices and works as a simple laptop movie streamer, too. The selection is terrific--over 20,000 movies are available-- though the payment option (for me) is not as terrific. Renting a movie for two days costs between $2 and $7, depending on the desirability of the movie and the streaming quality. A new release in high definition at $7 for 2 days? Pass. <strong>PROS</strong>: High definition streaming; terrific selection of new releases and classics; great "Collections" sections, including my personal favorite, a "Best of Rotten Tomatoes" playlist. <strong>CONS</strong>: Pay-per-view on-demand system can get very expensive very fast; no DVD rental.


    That ".org" is not a typo: <a href="" target="_hplink">Facets Multi-Media is a Chicago-based non-profit</a> founded in 1975 as a film appreciation group that now has a monthly DVD-by-mail rental system similar to Netflix's. There are over 75,000 movies in its warehouse, and one-out-at-a-time plans are $8.99 a month or $90 a year. If you're a little squeamish about signing up for a year, the monthly plan is one dollar more than the new Netflix DVD-only plan ($7.99), but perhaps you can justify the extra expense with the knowledge you're supporting a non-profit. As a film appreciation society, Facets has a great selection of rare and imported films, as well as playlists <a href="" target="_hplink">curated by "experts" that are worth checking out</a>. <strong>PROS:</strong> Reasonably priced DVD-by-mail rentals from a non-profit; excellent selection of independent and foreign films; recommendation lists from Werner Herzog, Stephen Sondheim, Dan Savage, and other notables. <strong>CONS:</strong> No streaming (yet--a company spokesperson says it's on its way); cannot match Netflix's prices, even after the price hike.

  • Zediva

    <a href="" target="_hplink">Zediva</a> is an intriguing video-streaming service that may or may not be legal (they are <a href="" target="_hplink">currently being sued by the MPAA</a>). It is streaming-only, and there is no high definition streaming, but the prices are incredibly low ($2 for a 14-day rental of a new release, or 10 rentals for $10). <a href="" target="_hplink">How do they do it</a>? When you rent a movie online, you are really renting a physical DVD and a DVD player at Zediva headquarters. The DVD player plays the movie for you and streams it--and thus Zediva does not have to pay the Motion Picture Association of America. So if you're looking for a way to both save money and tick off the MPAA, Zediva might be your best option. <strong>PROS:</strong> Very cheap prices for streaming new releases; no monthly fees; chance to stick it to the man. <strong>CONS: </strong>Might not exist soon; possibly illegal; substandard video quality and website design.

  • GreenCine

    <a href="" target="_hplink">San Francisco-based GreenCine is Netflix for film buffs</a>; they have "an accent on independent, art house, classics, foreign, documentary, anime and Asian cinema," as their website <a href="" target="_hplink">boasts</a>. With over 30,000 DVDs available for rent at plans starting at $9.95 per month (which lets you take out one video at a time), it's a little more expensive than Netflix for mail rental, but that is the price you pay for Greencine's "eclection" (again, per their website). Not included in your monthly fee are on-demand rentals: rather than streaming, you download the movie on DivX. Most of those rentals are $5 for 30 days with the DRM-protected flick. So, streaming is available, but only for a price. <strong>PROS:</strong> Awesome online selection of niche films, including anime, indie, and foreign; Blu-Rays available; DivX-quality watching on computer <strong>CONS:</strong> The prices. More expensive than Netflix, and the per-rental fee for streaming is way too high unless you are only streaming one movie a month