CBS channels pulled from Time Warner Cable

This image appeared on some Time Warner Cable subscriber screens after the company and broadcaster CBS could not agree on contract terms. (Shane Eichacker / August 2, 2013)

Unable to come to terms on a new distribution agreement, CBS-owned channels have gone dark on Time Warner Cable systems around the country, including Los Angeles and New York City.

In Los Angeles, the signals of KCBS-TV Channel 2 and KCAL-TV Channel 9 were pulled around 2:15 p.m. Friday. In New York, WCBS-TV, the flagship station of the CBS network, was also off of Time Warner Cable systems.

Other channels that were dropped include the CBS-owned cable channels Showtime and The Movie Channel (TMC). The dispute covers only CBS-owned channels. CBS affiliates that are carried by Time Warner Cable are not part of this fight. 

Time Warner Cable said customers who receive Showtime and TMC, both of which are sold on an a la carte basis, would receive a credit retroactive to the first day of the blackout. In the meantime, Time Warner Cable is offering the pay channels Starz and Encore in the place of Showtime and TMC. The company did not say whether it would offer a rebate to subscribers for the CBS TV stations.

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At issue is the price Time Warner Cable will pay to carry CBS-owned media properties including its local television stations. The two sides have been negotiating for more than a month, and each has waged a nasty advertising campaign against the other in print and on television.

The two are at odds over other terms as well. According to people close to the talks, Time Warner Cable is seeking conditions that would limit CBS' ability to sell product to broadband services such as Netflix or make their channels available to pay-TV distributors that could deliver content over the Internet instead of through cable or satellite. Such services are said to be in the works from Intel Corp. and Sony Corp.

Time Warner Cable, meanwhile, wants the ability to offer its subscribers CBS channels on iPads and other tablet devices inside and outside the home. CBS wants additional compensation for those rights. 

"Going to the mattresses," tweeted Kelly Kahl, a senior programming executive at CBS, referencing the mob movie "The Godfather."  

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Disputes over distribution fees are commonplace in the media industry. However, it is still rare for signals to actually go dark, particularly in big markets such as New York and Los Angeles. On Monday, Time Warner Cable briefly pulled CBS signals when negotiations stalled, only to return them to viewers within half an hour.

After that, talks resumed until late Friday. Now both sides have walked away from negotations and are again taking shots at each other. 

"Throughout this process, Time Warner Cable has conducted negotiations in a combative and non-productive spirit, indulging in pointless brinkmanship and distorted public positioning," CBS said.

Time Warner Cable countered that CBS has "refused to have a productive discussion" and that the cable operator would "continue to fight to keep their prices down."

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CBS is seeking a significant increase from its last deal with Time Warner Cable, signed five years ago. CBS is currently getting less than $1 per subscriber, per month from Time Warner Cable and would like to get that figure into the $2 range over the life of its next contract. 

The network noted that it has managed to negotiate deals with several other distributors including satellite broadcasters Dish Network and DirecTV and New York cable operator Cablevision Systems. 

"This is the first time in its history that CBS has been dropped from a cable system," the network said, adding that "Time Warner Cable, on the other hand, has a long history of taking channels off the air -- more than 50 in the last five years alone."

The channels may be off for a while, given the wide gulf between the two companies. An executive familiar with CBS' thinking said, "We will not blink, I promise you that."

Some Wall Street analysts, however, don't think the fight will last long.