CBS-Time Warner Cable talks break down as blackout deadline approaches

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CBS Corp. (NYSE: CBS) and Time Warner Cable (NYSE: TWC) attacked each other publicly Thursday as talks broke down in negotiations for a retransmission-consent contract.

Time Warner Cable subscribers in New York, Los Angeles, Dallas and other markets with CBS owned-and-operated stations could lose CBS programming on July 24 unless the parties agree to another contract extension.

CBS is demanding a 600 percent increase in fees, according to Time Warner Cable. The broadcaster began running ads Thursday that feature a chain wrapped around an HDTV displaying NFL football, "Big Bang Theory," "60 Minutes" and other CBS shows, telling viewers in a voiceover that "Time Warner Cable is holding your favorite shows hostage."

The attack drew a rebuke from Time Warner Cable, which went after CBS CEO Les Moonves, who has projected that CBS will collect more than $1 billion annually from retransmission-consent fees by 2016. "He has said 'the sky is the limit' when talking about the price he thinks he deserves for his CBS stations, and he clearly means it. He doesn't seem to care about our customers' budgets or the going rates for CBS programming," Time Warner Cable said in the statement, noting that CBS is demanding significantly higher fees than other station groups that own CBS affiliates.

CBS has also added some sophisticated social-media tools to its arsenal, running ads that encourage viewers to visit the website KeepCBS.com. The network prompts viewers on the site to enter their zip codes, which it uses to suggest Time Warner Cable rivals they can turn to in the event of a blackout. CBS is also using the site to create canned messages that Time Warner Cable subscribers can post on Facebook and Twitter or email to Time Warner Cable executives.

A blackout is unlikely, as both CBS and Time Warner Cable would suffer financially. The Eye Network would see both ratings and third-quarter ad revenue take a hit without Time Warner Cable subscribers in New York, Los Angeles and Dallas. And Time Warner Cable, which lost 119,000 video subscribers in the first quarter, will want to avoid a blackout which could result in a spike in subscriber churn.

But the nation's second-largest cable MSO has endured some lengthy blackouts in recent years as it has attempted to keep programming costs from rising. In late 2011 and 2012, it went nearly five months without NBC station KRIS-TV in Corpus Christi, Texas. Time Warner Cable also went through a blackout of regional sports network MSG which lasted nearly seven weeks after it demanded a 53 percent increase in license fees.

But the MSO said Thursday it is working to reach a deal before the blackout deadline: "We're going to continue to negotiate and hope to come to a reasonable resolution before our deadline, so that our customers don't have to endure yet another broadcaster blackout."

For more:
- see the Time Warner Cable statement

Commentary: Tracking the top 10 worst programming disputes of all time

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