CBS Launches Ad Attack in Time Warner Cable Dispute

Time Warner Argues CBS Wants Fees That Are 600% More Than in Other Areas of the Country

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CBS launched an ad campaign Thursday night warning that the eye network could be dropped from Time Warner Cable next week in major markets unless the two parties can reach an agreement.

"Time Warner Cable is planning to drop the most popular programming in its entire channel lineup because it won't negotiate the same sort of deal that all other cable, satellite and telco companies have struck with CBS," the network said in a statement. "Time Warner Cable has dropped nearly 50 channels in the last five years. CBS has never been dropped by a cable company before."

CBS began running a TV spot and radio campaign in Los Angeles, New York and Dallas on Thursday, and will roll out a print campaign in those markets on Monday. It also launched the site,, to advise viewers how they can find alternative options for viewing CBS programming on Time Warner Cable's competitors.

In response, Time Warner Cable argues CBS wants to charge fees that are 600% more than in other markets.

"It is unreasonable to expect our subscribers and Time Warner Cable to pay that price and we are negotiating very hard for a reasonable price," the company said in a statement. "This is not a standard debate over price increases. This is different. CBS' demand for a 600% premium is unprecedented."

Time Warner Cable added that broadcasters have hit customers with 84 blackouts over the past 18 months and that CBS's president and CEO Leslie Moonves has been outspoken about the programming fees he believes the network deserves. "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."

Time Warner Cable currently pays CBS between 75 cents and $1 per subscribers, according to RBC Capital Markets analyst David Bank.

"Some have argued by having never pulled their signal before and playing 'Mr. Nice Guy,' CBS has left money on the table," Mr. Bank wrote in a research note, adding that CBS is likely seeking about $2 per subscribers ramped up from a lower base over a two to three year period.

"We believe there has been a significant 're-value' for broadcast network TV content since that time due to a number of factors including increased VOD and potential TV Everywhere utility, the higher cost of sports programming (especially NFL) and a more competitive distribution environment where demand has increased for quality content," Mr. Bank wrote.

Retransmission fees -- the fees cable and satellite providers pay to carry broadcast signals -- have become a point of contention in the space. Mr. Moonves has previously said it expects CBS to bring in $1 billion a year in retransmission by 2017.

"We understand that distributors will work to be vigilant about controlling costs. However, we see them in a significantly weaker position when it comes to retransmission re-negotiations with the major station owners," Michael Morris, analyst at Davenport and Company, wrote in a note. "In this case, CBS stations reach about 25% of TWC households (three million of TWC's 12 million subs) while TWC households account for only 2% [to] 3% of CBS's total audience."

CBS's existing agreement expired June 30, but the companies agreed to extend the contract until July 24 to negotiate. A CBS blackout would impact major markets including New York, Los Angeles and Dallas.

While summer is typically a slow month when it comes to programming, CBS's "Under the Dome" has been a success for the network, bringing in 10.8 million viewers in its most recent episode.

In the past year, AMC Networks and AT&T and Viacom and DirecTV have experienced similar disputes resulting in blackouts of the networks before new agreements were reached.

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