CBS/TimeWarner Squabble Denies Viewers - UPDATE

Apparently CBS really needs cash - otherwise the retransmission fees fight with TimeWarner would have been settled long ago.  The short version is that stations get to negotiate for compensation from cable and other multichannel video bundlers for the rights to rebroadcast the broadcast station signals every few yeats.  Last Friday was the negotiation deadline, and FCC rules require cable and multichannel systems to drop the broadcast signals if no agreement has been reached.  So TimeWarner dropped the CBS-owned local broadcast stations (mostly in large markets) from their line-ups.

  To add some spice, Time-Warner also dropped all CBS-owned cable networks (including Showtime and TMC) at the same time.

  Then CBS tried retaliating by blocking access to CBS programming through the internet to TimeWarner internet customers.

  From reports, it seems like the hang-up is that CBS wants at least $2/month per subscriber from TimeWarner - a price that is difficult to justify from an economic perspective for a network whose ratings have been falling for decades, and which has been touted as "free TV." (at least when accessed off the air).  While less than rate leader ESPN gets, its more than twice as much as other general interest cable networks are getting.

-- A quick aside - CBS approached me as an outside consultant in the late 1990s as to the retransmission value of their network.  At the time, based on primetime audience viewing share and average cable subscription rates, they thought they ought to be getting $5-7 per month per subscriber.  I had to remind them that viewing isn't the same as willingness to pay, and that pushing for any significant amount in fees would likely be an economic and PR disaster for CBS  After all, they'd be asking people to pay for access to "free" broadcast programming, and cable would gladly advise customers about how to get the programs over-the-air (or these days, offer CBS as a stand-alone a la carte channel and see how many would be willing to pay).  Apparently they didn't like my analysis, because they "forgot" to pay me the agreed stipend (that's why I feel comfortable sharing this with you now).  Still, they didn't push for cash in that round of negotiations, so I guess they felt I had a point.

Since most viewers in those markets have options for getting CBS free (over-the-air and online through CBS.com), or bundled in with other channels from alternative multichannel services, in the long term viewers will figure out how to get what few programs they really want from CBS.  Still, in the short term, lack of "normal" access is likely to hit viewing and ratings hard.  In the meantime, CBS isn't gaining any PR points from their insistence that viewers pay for access to what the network's been touting as "free TV" for years.  TimeWarner isn't helping itself either in the short-term, although they may benefit in the long term as consumers start to learn just how much they're being asked to pay for network programming (those rising fees aren't just cable company greed - they're mostly pass-throughs of retransmission fees from broadcast and cable networks).

Should be fun to watch, although I doubt it'll go on for long - there's too much to lose for both CBS and TimeWarner.

Update:
TimeWarner has made an offer to CBS to include it as an "a la carte" channel, at whatever price CBS wanted.

"Rather than our debating the point, we would allow customers to decide for themselves how much value they ascribe to CBS programming," said TimeWarner CEO Glenn Britt.

CBS dismissed the offer as a "sham" and "PR stunt." Recent statements from media analysts suggest that moving to a la carte could likely cut revenues to networks and program producers in half.  Maybe CBS does know how much value viewers place on access to CBS programming after all.

Sources -  No Deal! CBS and Showtime Go Dark on Time Warner Cable, Deadline-New York
CBS Blocks Time Warner Customers From Watching Full Episodes on CBS.com,  TechCrunch