The latest battle between network TV and the cable industry has CBS fans in New York, Los Angeles, and Dallas in the dark. Time Warner Cable customers in those three major markets can’t watch their favorite CBS shows on cable. And Time Warner Cable’s Internet customers everywhere don’t have access to CBS’s shows online. This is all because of failed negotiations between CBS and Time Warner Cable over re-transmission fees — the money that cable companies pay to programmers for the right to broadcast their content.
[EDITOR'S NOTE: Central Florida and WKMG Local 6 are not affected by this CBS outage]
From The New York TImes:
CBS released a statement on Sunday saying no negotiations were taking place and it stressed its willingness to continue talking. A Time Warner Cable spokeswoman, Maureen Huff, said in an e-mail message: “We’re ready and willing to talk at any point. We want to resolve this, and are absolutely negotiating in good faith.”
THELAW.TV asked five questions about the CBS/TWC impasse to Tim Winter, president of the Parents Television Council. Mr. Winter has a law degree and spent more than 20 years in broadcasting, cable, and digital media, including 15 years at NBC, where he helped manage the network’s financial interest in two dozen cable networks.
Why did this happen?
About 20 or so years ago, Congress created something called “Must Carry – Retransmission Consent.” It means that over-the-air television broadcasters have the ability to secure carriage on the local cable operators’ basic cable package. Broadcasters can choose either one or the other of “Must Carry” or “Retransmission Consent”. By choosing the former, the broadcaster can ostensibly tell the local cable operator that they “must carry” their broadcast signal on their basic package, but there is no charge to the cable operator for doing so. (And by extension, there is no additional fee that would be passed along to the consumer.) This is the option chosen by smaller and less-powerful broadcasters as a means to make sure their signal is distributed via the cable company. The latter option – “retransmission consent” – means that the local broadcaster can negotiate a price at which the cable operator would carry the broadcast channel on the cable operator’s basic cable package. This option is routinely chosen by larger, more powerful and network-affiliated stations in a market. With their network programming, they have the clout to force the cable operator to pay a monthly fee for their signal, and that cost is passed along to the consumer. At this juncture, the distribution contract between CBS – which owns the local broadcasters in many markets around the country – and Time Warner Cable – which is the largest cable operator in markets like New York and Los Angeles– has expired, and the two sides have been unable to come to an agreement on the new carriage terms.
Could it have been avoided?
While most contract disputes between broadcasters and cable operators are able to be negotiated without any disruption of service, that is not always the case. And the carriage arrangements have become more complicated in recent years. The broadcast networks are now able to deliver streaming video of their television programming via the internet. This competes with the television viewership for the cable programmers who are paying the broadcasters for their content, and they feel the value of the broadcast signal is diminished. The broadcasters, however, feel that their signal is as valuable – or more valuable – than most of the cable-only networks (e.g. ESPN, History, Disney, USA, etc.) that garner between $1.00 – $4.00 per month per subscriber. With programming costs going up dramatically for broadcasters, and more viewers watching cable networks or internet-delivered programming, their advertising revenue is declining. Increased fees from the cable operators is their best way of generating more revenue. But the cable operators are trying to keep their costs as low as possible. Many cable subscribers are “cutting the cord” because costs have become too high. Could this all have been avoided? Perhaps. But with such a growing complexity surrounding the marketplace, more and more carriage disputes like this one are to be expected.
Who is to blame?
One of my favorite legal terms is in pari delicto. In layman’s terms it means that both parties come with dirty hands, and that is absolutely the case here. Both sides are digging in for a fight because of the substantial dollars at risk with the negotiation. Do the math: For each monthly subscriber dollar that is being debated here, we are talking about potentially 90+ million cable subscribers across the US [times] $1.00 [times] 12 months per year. That is over a billion dollars per year, and just for one network. CBS wants as much of that as possible. Time Warner wants to avoid as much of that as possible, as they are already hiking their rates at multiple times the rate of inflation. And as a result they are losing subscribers at a concerning rate (for them). Ironically, both sides are reaching out to their subscribers – to the public – trying to paint the other party as the greedy one who is causing this disruption of service. But both parties are to blame, and the tragic comedy of all this is that it is the customer who will ultimately get screwed by the price increase that comes as a result.
How will it end?
Neither party can ultimately live without the other, so there will ultimately be a new agreement. Such disputes that disrupt carriage usually last no longer than a few days. With August having very little original programming and very little must-see sports coverage, the dispute may last a couple weeks. But I would be shocked if it went longer than that. I would guess everything will be settled by mid-August at the very latest, and more likely within the week. CBS will be paid an increase from what they are getting now, and it will be passed along to the consumer by Time Warner. Most subscribers won’t even notice an additional dollar per month in their cable bill, and both CBS and Time Warner know that.
How does this affect consumers?
In every carriage dispute – whether it be a broadcast network or a cable network on the one hand, and a cable or satellite operator on the other – the customer is always used by both sides in an effort for sympathy and support. But ultimately the customer gets soaked with a higher cable bill and no direct recourse against it except to cancel cable altogether. That is why we are so fiercely advocating for Consumer Cable Choice. Cable consumers – not the cable operators and not the networks – should be able to decide for themselves which networks they want to pay for. We believe the forced bundling of networks onto consumers is illegal, and at the very least it is immoral and runs counter to a free marketplace. There is no other cartel-like bundling scheme in the stream of commerce. If the customer was able to ultimately decide for themselves which networks they wanted to pay for, there would be no service disruption. And programmers would be forced to deliver a quality product at a price that the consumer would be willing to pay.