Were Consumers The Biggest Losers In The CBS-Time Warner Cable Dispute?

It sure looks that way. Millions of Time Warner Cable customers lost CBS-owned stations and channels for a month, and will still probably see their monthly rates rise to accommodate the deal that the companies made last night. But what did you expect? Since August 2, when CBS stations, Showtime and other channels went dark on TWC systems, virtually everyone knew that the distributor would have to cry “uncle” before the NFL season begins. Although the companies are tightlipped about the terms of their new deal, that seems to be what happened. CBS’ Les Moonves signaled to everyone that he believes he prevailed on the financial terms. “We are receiving fair compensation for CBS content and we also have the ability to monetize our content going forward on all the new, developing platforms that are right now transforming the way people watch television,” he says. No wonder investors have sent the broadcaster’s shares +4.3% in mid-day trading vs a 1.2% increase for TWC.

The cable company’s believed to have been paying around 55 cents per month for each subscriber who receives a CBS-owned station. Under the new deal, the cable company’s outlays will rise to $1.50 in 2014, and $1.90 in 2016, Davenport & Co analyst Michael Morris estimates. TWC also will pay higher amounts to offer CBS programming on VOD and digital platforms including its TV Everywhere offering. Wells Fargo’s Marci Ryvicker says that CBS even could receive retroactive payments for the last month which is “rare when stations go dark.”  All told, the deal will be “a positive catalyst for CBS and broadcast,” Ryvicker says.

So why did the cable company go through all the trouble? The month-long blackout increased the pressure on lawmakers to step in — likely to help pay TV distributors resist broadcasters’ growing demands for ever-increasing retransmission payments. TWC chief Glenn Britt says that “we certainly didn’t get everything we wanted.” But he pointedly added that he’s “encouraged by the 50+ consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules. The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love.  We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon.”

Other cable industry allies are ready to drive that message. The American Television Alliance says that CBS vs TWC was one of several recent spats over retransmission fees. “When subscribers of six different providers in 58 markets are blacked out of 84 separate stations, how can Congress and the FCC fail to acknowledge that the 21-year-old retrans system is broken? In the next round of hearings on video, we strongly encourage Congress to ask the broadcasters about the record number of blackouts and CBS’ troubling blackout of its online content.”

And that seems to have been the point. The outcome — with CBS winning a big price increase ahead of the NFL season — “was obvious from the start,” Bernstein Research’s Todd Juenger says. “There was no way TWC was going to not carry CBS.” The cable company played hardball in August “to take advantage of a moment in time to score points with regulators.” BTIG’s Rich Greenfield, who urged TWC to dig in its heels, takes a similar view. “Broadcasters and their investors may cheer CBS’ victory over Time Warner Cable,” he says. “But stay tuned; the seeds of change for retransmission consent [reforms] have been planted.”