Time Warner offers "a la carte" option in CBS fight

Last Updated Aug 6, 2013 4:18 PM EDT

Updated Aug. 6, 2013, 1:16 p.m. EDT

(MoneyWatch) Time Warner Cable (TWC) offered in a letter on Monday to resume carrying CBS programming after dropping the broadcaster's signal last week in several major markets.

The blackout, involving the CBS television network and the Showtime movie channel in Dallas, New York, Los Angeles and other markets, was prompted by a dispute over the fees Time Warner pays for CBS content.

In the letter, Time Warner Cable CEO Glenn Britt offered to resume carrying CBS programming "with the new economics TWC reluctantly agreed to during our negotiations." Britt did not spell out what those terms were, and neither side had made them public.

Britt added that if the terms were still unacceptable to CBS, Time Warner would "be willing to resume carriage by allowing CBS to make its stations available on an a la carte basis at a price and on terms of its own choosing."

CBS Corp. (CBS) issued an unequivocal response criticizing Time Warner's offer. "Today's so-called proposal is a sham, a public relations vehicle designed to distract from the fact that Time Warner Cable is not negotiating in good faith," the company said in a statement. "Anyone familiar with the entertainment business knows that the economics and structure of the cable industry doesn't work that way and isn't likely to for quite some time. In short, this was an empty gesture from a company that is expert at them."

CBS chief executive Les Moonves on Tuesday dismissed Time Warner's proposal as a public relations move aimed at gaining negotiating leverage.

"Anyone familiar with the entertainment business knows that this is an empty gesture," he said in a letter addressed to Time Warner Cable CEO Glenn Britt that was distributed to the media. "The economics and structure of the cable industry have created a certain way that content is distributed and compensated. We both know that a true a la carte universe is not one that Time Warner Cable welcomes."

"We view your so-called proposal, then, as nothing more than an attempt to muddy the water and confuse the public discussion," Moonves added.

On Sunday, CBS spokeswoman Shannon Jacobs said there were no negotiations taking place between CBS and Time Warner Cable.

The dispute between CBS and Time Warner reflects a broader clash over the fees that pay-TV distributors pay to re-transmit broadcasters' TV signals. While networks want a good deal for their content, cable and satellite companies are seeking to limit cost hikes that could scare off customers.

That dynamic has caused considerable industry friction. In 2011, for example, the fight over these affiliate, or "carriage," fees led satellite provider DirectTV to threaten to drop Fox channels including FX, National Geographic and regional sports networks. The sides eventually reached a settlement.

Time Warner Cable also has clashed with Hearst, ABC and Fox over fees in recent years, while other distributors have periodically threatened to stop carrying a network's signals. Typically, an agreement is reached, averting blackouts.

Fees from licensing deals are important to broadcasters both as a way to drive growth and to smooth the rise and fall in their advertising revenue, which can swing sharply according to the strength of the economy. In announcing its latest earnings on Wednesday, CBS reported that non-advertising sales now represented 43 percent of the company's total revenue.

Editor's note: CBS Corp. is the parent company of CBSNews.com.

  • Charles Wilbanks

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