The entertainment giant likely won’t be bloodied by the new dispute that has left 14.1M Dish Network subscribers unable to watch eight Turner Broadcasting channels, not including TBS and TNT. Veterans of the programming wars expect to see a resolution soon, possibly within days. But the battle could leave stinging bruises at Time Warner if it reinforces the impression that CNN has lost its status as a must-have channel, or that others are disposable.
Dish’s deal for CNN, Cartoon Network, Adult Swim, truTV, TCM, HLN CNN en Espanol, and Boomerang expired in late June; a separate one for TBS and TNT runs out in several weeks. The companies agreed to a series of extensions for the smaller network deal as the companies negotiated renewal terms for all of Turner’s channels — as well as provisions to add at least some of them to an online service that Dish plans. The process fell apart last night, at least in part because Dish said it wanted to maintain the time distance between the contracts for the larger and smaller networks. Turner wants the two to be closer together; there’s no separation for most of its carriage agreements with major cable and satellite companies.
Dish says that Turner removed the networks, and is making “unreasonable financial demands.” The programmer responds that Dish “unilaterally decided” to yank the channels, while it has offered “multiple extensions and compromises.”
There’s a wide belief that Dish Chairman Charlie Ergen is seizing a window of opportunity to join other pay TV distributors trying to scale back small services, especially those with declining ratings or shows that are also available elsewhere. Suddenlink and several small operators recently decided to go without Viacom channels. Last year Cable One also took on Turner, seeking to carry TBS, TNT and Cartoon Network without many others. (That’s since been resolved.) By striking now, Dish can strike a blow without immediate fear of losing TNT’s NBA games when the season begins on October 28.
Ergen seems to be digging in his heels with other programmers as well. I’m told that CBS feels that Dish is dragging its feet in their retransmission consent negotiation and that a deal may not be done before the current one expires around Thanksgiving. In August, Dish dropped Comcast SportsNet New England, which carries the Boston Celtics.
At this point, the disagreement between Dish and Turner is just a minor skirmish. Dish pays about $265M a year for the channels, about 3% of Turner’s annual subscription revenue this year, Wells Fargo Securities’ Marci Ryvicker says. Subscribers pay an average of $1.57 a month for the services. If they were dark for a year, it might cut Time Warner earnings by about 1%, or 4 cents a share. She adds that Dish also likely won’t lose many subs as a result of the dispute. (That could change if the channels are still off during the Christmas shopping season, when satellite companies typically pick up a lot of customers.)
But Time Warner could run into trouble if Dish’s action emboldens others to try and drop the smaller Turner networks. For example, it was once unthinkable for a cable system to drop CNN — it was a must-have network due to the high regard that viewers, and especially the political elite, had for its news operation. That’s changed, though, as the channel’s ratings have hovered near 20 year lows. Meanwhile, distributors complain that a lot of the programming on Turner’s entertainment networks are tired re-runs (including Friends and Seinfeld) or are available elsewhere, including online.
Time Warner also can’t afford a protracted war after promising Wall Street that it will increase profits at its ad-supported channels through 2018, even as it doubles its outlays for original programming including sports. It expects to more than recoup the outlays by raising prices on cable and satellite distributors. “We’re approaching these discussions from a position of strength,” Turner CEO John Martin told analysts last week.