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What Is Going On in the Fight Between Time Warner Cable and CBS?

08/14/2013 11:42 am ET | Updated Oct 13, 2013
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Answer by Thomas Craven, Tech/Media/Telecom equity analyst

Historically, pay TV operators like Time Warner Cable didn't have to pay retransmission fees for broadcast networks like CBS that could be viewed for free over the air. In recent years, this has changed, with broadcast networks demanding increasing fees for carriage of their content. Those fees are negotiated privately between the networks and pay tv providers, and in this case, Time Warner Cable has chosen not to carry CBS and Showtime in NY, LA, Dallas, Chicago, Boston, Denver, Detroit and Pittsburgh (covering ~3m subs) rather than to pay the amount CBS is requesting. 

Disputes between content providers and pay tv happen from time to time, but this one is noteworthy in several ways. First, CBS is a traditional free over-the-air broadcast network. That potentially opens up opportunities for untested over-the-air retransmission models like Aereo's. Aereo essentially rebroadcasts free over-the-air content to digital devices, avoiding retransmission fees. This has led to lawsuits from the broadcast networks and scrutiny from regulators.

Second, CBS has responded by blocking TWC broadband customers from accessing full episodes on CBS.com. This has only been done once before, when Fox blocked its content on Hulu as part of a 2010 dispute with Cablevision. Fox reversed that decision due to customer backlash. 

Third, CBS is the number one network in America. With major programming like the NFL and its slate of top-rated shows due to return in the fall, a protracted dispute could lead to public backlash and regulatory involvement.

And finally, this dispute is noteworthy in that pay TV rivals are not aggressively going after Time Warner Cable's customers by advertising that CBS content is available on their platform. DirecTV has even gone so far as to publicly support Time Warner Cable's position.

The outcome is being watched closely by other pay tv and content providers, who all have an interest both their own ongoing retrans negotiations and in the future of the pay-tv business model.

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