Time Warner Cable drops CBS in New York, L.A., Dallas

Roger Yu | USA TODAY

CBS has gone dark in some of the largest media markets.

Unable to reach a contractual agreement by their Friday, 5 p.m. deadline, Time Warner Cable dropped the No. 1 primetime network in New York City, Los Angeles, Dallas and several other markets.

The cable networks owned by CBS - Showtime, TMC, FLIX and Smithsonian - also were taken off the air in these markets, where about 3 million customers subscribe to the nation's second largest cable TV provider.

TWC said customers who currently pay Showtime or TMC will get a credit for those channels in an upcoming bill, going back to the first day of the blackout.

"We deeply regret this ill-advised action, which is injurious not only to our many affected viewers, but also to Time Warner Cable itself," said CBS, in a statement.

"CBS has refused to have a productive discussion. It's become clear that no matter how much time we give them, they're not willing to come to reasonable terms," TWC said in its statement.

The companies are seeking to extend their contract for retransmission fees, the money that cable and satellite TV providers pay station owners for the right to carry their signals. The contract expired at the end of June but the network was kept on the cable company's lineup as the talks continued. They've set numerous deadlines in the last month that were repeatedly delayed.

After their last deadline expired at midnight on July 29, TWC briefly dropped CBS but resumed the network's programming shortly after agreeing to more talks.

Without a contract in place, the companies have repeatedly warned, the network would be dropped for TWC customers in eight markets nationwide. It'll particularly affect three major cities where TWC is the dominant pay-TV provider and CBS owns its local network station — New York, Los Angeles and Dallas.

The contract only involves TV stations owned by New York-based CBS Corp. CBS-affiliate stations owned by other broadcasting companies — even if they're in TWC service areas — are not affected by the negotiations.

"The bid-ask seem to be too far apart, possibly at a $1 or less bid from TWC and $2 or more asked from CBS," said Robin Flynn, an analyst at research firm SNL Kagan. "Both companies seem to be using this high-profile dispute as an opportunity to make a stand and set the tone for future negotiations."

RBC Capital Markets, an investment bank, estimates CBS gets paid about 88 cents per cable subscriber per month for retransmission rights.

TWC has said CBS wants to raise the fee as much as 600%, though it says that figure is based on an average fee it pays for all CBS stations in service areas.

Without revealing specific numbers, CBS said fees from cable companies should be in line with the popularity of its shows - including NCIS, Under the Dome, The Big Bang Theory, 60 Minutes - and denied that it's looking for a 600% increase. "What CBS seeks, and what we always have sought from the beginning, is fair compensation for the most-watched television network with the most popular content in the world. We will not accept less," the network said.

CBS is ambitious about increasing retransmission fees to diversify its revenue sources. CBS generated about $250 million in retransmission revenue last year and expects to top $1 billion by 2017.

Timing and seasonal factors may have influenced TWC's decision, Flynn said. "The fact that it is the summer time and CBS does not have high-profile sports such as football or a new fall season underway on their network seems to be an opportunity for TWC to dig in," she said.

CBS fans can continue to get the network's signals with a rabbit-ear antenna. For about $8 a month, viewers in New York City can also subscribe to Aereo, a technology company that streams over-the-air broadcast signals in several cities.

CBS also streams some shows on its website. But TWC accused CBS of blocking TWC customers, including those who only subscribe to a high-speed-data-only plan, from accessing its shows on the free website.

"Add in Aereo in New York, TWC's threat to take away CBS' channel positions, and the proliferation of high quality online programming, and this standoff has gotten more complex and involves more dollars than any other recent dispute," Flynn said.

In a battle of words through a series of statements publicly issued Friday, both parties accused the other of playing hardball and wreaking havoc on consumers' viewing habits. CBS urged viewers to call TWC to add pressure to negotiate, while reminding them of the shows they will miss in the coming days - CBS Sports live golf coverage beginning on Saturday, including the World Golf Championships; the PGA Championship that starts on Aug. 8; and a pre-season NFL game between the New York Jets and the Detroit Lions on Aug. 9.

The following eight CBS-owned stations are part of the negotiations. They include stations airing CBS or CW network programming and independent (Ind) stations:

• New York: WCBS and WLNY (Ind)

• Los Angeles: KCBS and KCAL (Ind)

• Dallas: KTVT-CBS and KTXA (Ind)

• Boston: WBZ-CBS and WSBK (Ind)

• Pittsburgh: KDKA-CBS and WPCW-CW

• Chicago: WBBM-CBS

• Detroit: WKBD-CW

• Denver: KCNC-CBS