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CBS, Time Warner Leave Customers Hanging in the Breeze

CBS, Time Warner Leave Customers Hanging in the Breeze

It's a battle royale between Time Warner and CBS over transmission fees, and consumers are likely the ones who will bear the heaviest price. "No matter what happens, the consumer will be the one who pays," said analyst Rob Enderle. "For a lot of people that might only watch a couple of CBS shows, this could be enough to make them look at other options ... You shouldn't put the customer in the middle."

By Peter Suciu
07/31/13 5:00 AM PT

CBS viewers who get their broadcast TV service via Time Warner may have felt a little bit like the characters in summertime drama Under the Dome in the last 24 hours or so. Specifically, as part of a battle over retransmission fees, the cable giant on Monday briefly pulled CBS from its lineup in several key markets, effectively cutting off CBS for viewers in New York City, Dallas, Los Angeles and other major cities.

CBS stations including the premium channel Showtime as well as Smithsonian, TMC and Flix were pulled from Time Warner's lineup at about midnight EDT. However, less than half an hour later, the channels were restored.

With a new deadline of Friday at 5 p.m. EDT, the two companies have now agreed to continue to negotiate over the issue of transmission fees that Time Warner pays to run CBS-owned stations, including network affiliates in major markets. In the meantime, it seems that it is customers who are getting caught in the middle.

Battle of the Titans

CBS has been working to advance its cause directly with customers for more than two weeks already, providing information through TV, radio and print ads as well as the newly launched website KeepCBS.com.

If CBS goes dark on Time Warner, the company has stressed, subscribers won't be able to access their favorite CBS programs.

Time Warner, for its part, has been equally vocal that CBS wants it to pay unreasonably high transmission fees.

"We are fighting these fights for our customers, and we have acknowledged that we pay CBS for this content," Time Warner Cable spokesperson Maureen Huff told CRM Buyer. "It is the rate of this content that is in contention."

Meanwhile, in a separate yet related move, Time Warner has also increased the modem rental fee on its most popular service plan.

'They Are the Buffer'

"One of the problems that cable companies face is that they are sort of the buffer between the customer and the content," Collin Dixon, founder and principle analyst with nScreenMedia, told CRM Buyer.

"Over the years, the content providers have demanded more money," Dixon explained. "The cable providers' margins have eroded a lot. Even as prices have gone up, the content costs have gone up faster.

"If they kept pace with the costs of the fees, the cable bill would truly skyrocket," he added. "Content has outpaced inflation. Pay TV has gotten a lot more expensive for the consumer."

Softening the Blow

Part of the problem for cable providers is that there are now more channels than ever, and each is looking to get paid. One of the ways that cable companies have worked to soften the blow for consumers has been to bundle services such as phone and Internet with their offerings -- but that only goes so far.

"It might seem ironic, but as customers you should be pulling for the cable companies, especially if you want to see lower prices," Dixon said.

CBS CEO and president Les Moonves "has said he wants to be paid for the content, but what he really wants is to be paid more for the content," Dixon added.

'Pulling the Plug'

However this week's negotiations progress, there's little doubt the result will be higher prices for cable subscribers.

"No matter what happens, the consumer will be the one who pays," Rob Enderle, principal analyst at the Enderle Group, told CRM Buyer. "For a lot of people that might only watch a couple of CBS shows, this could be enough to make them look at other options."

In fact, "there are many people who are pulling the plug because of these issues," Enderle added. "You shouldn't put the customer in the middle."

'Content Insurance'

The fact remains, however, that the broadcast networks are still a significant part of what people want in their TV service, Dixon said.

"The broadcasters have looked at data that the top four channels that people want in their lineup are ABC, CBS, NBC and Fox -- above ESPN and USA and other cable channels," he said.

For many, those channels could be obtained for free using a simple antenna. So why do people pay for them?

"I call this content insurance, Dixon said. "You are paying so someone else can watch ESPN."

A Lose-Lose-Lose Proposition

In any case, no matter who wins from this latest skirmish, it's pretty clear that there are three potential losers.

"CBS loses if it goes dark, as they lose the ad revenue when people watch ABC instead and the advertisers move to another channel," said Enderle.

"Time Warner loses because customers could look to another content provider like AT&T," he added.

As for customers? "In the end this is going to accelerate the speed at which people turn away from the networks and cable," he concluded. "You can only treat customers badly for so long."


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