August 21, 2013

Time Warner vs. CBS: The high stakes of their fight over fees

Cable subscribers are now in week five of the battle between Time Warner Cable and CBS that is keeping the network’s programming from being shown in such major markets as New York, Los Angeles and Dallas (On August 14, cable customers in Los Angeles filed suit against Time Warner for dropping CBS). These battles are not new. During the 2010 World Series, the Fox broadcast network refused to allow Cablevision to carry the network during the first two games of the World Series.

In both cases, the core dispute was over the same thing: retransmission fees.

Retransmission fees include cash or other compensation that cable, satellite and telecommunications companies pay to local TV stations and, indirectly, to the networks (such as CBS, NBC, ABC, Fox and CW) for the right to carry broadcast programming in the local markets.

These fees are split between the local station and affiliated network, and are the subject of negotiations. Indeed, one of the reasons given for the recent sales of multiple stations to the Tribune and Gannett companies is it increases their leverage with networks when bargaining over retransmission fees.

As the networks have negotiated for higher retransmission fees in the past decade, they have become an increasingly important source of revenue at a time when the advertising environment—except for political advertising—has grown more challenging.

The growth in retransmission fee revenues helps explain the stakes in this high-profile Time Warner-CBS standoff.

Retransmission payments have been increasing rapidly in the past decade, according to data from the investment firm Veronis Suhler Stevenson. In 2011, the last year for which there were finalized data, retransmission revenues equaled almost $1.5 billion, more than 70 times higher than they had been in 2003 ($20 million). And estimates by VSS project that revenue will more than double—to about $3.7 billion—by 2016.

VSS estimates that, by 2016, the share of these fees as a percentage of overall station revenue will have doubled compared to 2011. Another financial information firm, SNL Kagan has an even more bullish projection, estimating that by 2018, retransmission revenue will account for more than 20% of TV stations’ ad revenues.

A number of analysts have speculated that the Time Warner dispute with CBS may not be resolved until the National Football League kicks off play in September. (The first games on CBS are scheduled for Sunday, Sept. 8).

 

Topics: Media Economics, Media Revenue Models, State of the News Media, Television

  1. is a Research Analyst at the Pew Research Center's Journalism Project.

Leave a Comment

Or

All comments must follow the Pew Research comment policy and will be moderated before posting.

15 Comments

  1. Tina Cornwell7 months ago

    I applaud you Time Warner Cable! You held your ground! I was originally considering finding a new cable provider. Then I did my research. Got to the real truth. I knew if you gave into their demands, all other smaller cable companies would be forced to follow suit. I have been a loyal customer for 26 years and I applaud you for protecting your customers! Well done! :-)

    Reply
  2. bikergwen8 months ago

    We had so much trouble w/ Time Warner before this dispute, 5 different cable boxes in 7 months, having to re-boot several times a week, that when we couldn’t get Dexter it killed the deal. So happy we switched to DirecTV. Time Warner is now just a bad memory.

    Reply
  3. Fan8 months ago

    It’s too bad that people aren’t familiarizing themselves with the facts. TWC is taking a stand against CBS against rates that CBS wants to charge TWC – rates that YOU will pay if CBS wins.

    It sounds like most of these disgruntled CBS fans would prefer TWC to bow down and get those rates passed onto them in the form an increased bill.

    Some people…

    Reply
  4. Tabs19638 months ago

    I don’t really care who is right or wrong. Am in the Dallas market and have been a time warner customer for 8 years. I pay TW to provide me channels and am tired of this stupid blackout. Figure no matter what happens, their going to continue to raise my rates. Called verizon Fios and got a much better deal. Switched last week and bundled my Internet / cable and am saving about 20% per month. Poor Fios guy that did our install said they had been working overtime with installs from all the new customers their getting. Took our TW boxes back and had to wait in line for 1.5 hours. Probably 100 people in line who also cancelled, returning equipment. Felt sorry for the TW employee’s working there. All they had to work with was the marketing propaganda their corporate office had given them. Am thrilled with Fios. Thanks TW for forcing me to shop around.

    Reply
  5. Kbad8 months ago

    I wonder who at CBS owns stock to Direct TV…..trying to get us to move away from cable to satellite. This is ridiculous. Is time Warner going to give us credit for not having all our channels (CBS) for this long time…you’re forcing us to other means . Shame on everyone. We pay a fortune just for basic service. Get on with it.

    Reply
  6. Jim Fagan8 months ago

    I am with TWC and am in an area that still receives CBS (Kansas City) but no Showtime. Two of my favorite shows are on Showtime (Dexter, Ray Donovan). I was willing to wait a couple of weeks for this to be resolved but – 5 weeks and counting. Screw you TWC. I’ve an appointment in a couple of weeks to go back to U-Verse.

    Reply
  7. Russ Dorsey8 months ago

    Twc needs to be fined gor not compensating customers.
    CBS needs to be fined for gouging cable companies
    .

    Reply
  8. Ian8 months ago

    Seems low.

    $2,366 Million (est) for 2013 is only $23.66 per year for each of the approx 100 Million cable and satellite subscribers in the US, or about $2 per month for rebroadcast of all local channels.

    Do satellite companies pay re-broadcast fees, BTW?

    I guess the side you are on in this debate depends whether you’re a sports fan. CBS pays big-time for NFL and other sports, and having all cable subscribers pay for that, regardless of whether they watch, is hugely beneficial to the sports nuts. Otherwise they’d be paying megabucks for a sports package.

    Reply
  9. Betty Singleton8 months ago

    We were considering moving from Time Warner to Direct TV and then we started researching comments on line and saw that Direct TV was also worried about CBS’s contract. So what do viewers of CBS Morning, CBS Sunday Morning(recorded), Face the Nation (recorded, we still go to church) 60 Minutes, NCIS, THE BIG BANG, DAVID LETTERMAN do? It is a greedy, greedy world. We don’t notice so much until it impacts our own selfish little world. Why don’t you both take a broader view of how your own selfishness interests may damage the impact of your great news programming leading to a safer, more tolerant world. I am a big fan of how you have turned your news programing around. Some of us still get hungry for a balanced view of the news. Also we appreciate your reporting on issues that actually impact the state of our nation, not just a bunch of “talking heads” that are too lazy to go out and actually research and report what is going on. IF YOU LOVE YOUR COUNTRY, PLEASE GET THIS RESOLVED! Now that sounds a little overboard, but impressive.
    Respectfully,
    Betty Singleton

    Reply
  10. Terry8 months ago

    I am not on cable- I use the “box” to receive tv over the airwaves & everything for CBS has disappeared totally— argue all you want over “rebroadcast fees,” but what about US who no longer are even able to receive a major network channel??? This has been a VERY big disappointment for my entire family as close to 90% of our viewing was on CBS. Why are you messing with us faithful viewers???

    Reply
  11. Laurie8 months ago

    CBS should not be asking for such a hugh increase. What it boils down to is that they are spoiled brats and want us to pay for their million dollar homes, expensive cars, clothes and shoes for them and their spoiled families. Sorry CBS I agree with TWC on this matter. As stated below you are BULLIES.

    Reply
  12. Damian8 months ago

    This dispute has let the cat out of the bag. What this has done is drive folks to over the air antennae to receive free signals, or cut the cord and use aereodotcom for $8 a month to receive all the major networks in many of the affected areas. The other result is stations will become a la carte and high speed internet access will drive content through Playontv and Hulu and so on. Everything cable TV offers is now an anachronism…from digital phone to premium. People can Bluetooth their cell phones to home wiring, and download content. For cable tv, it is like an evergreen cut for the holidays. It looks alive but it is already dead.

    Reply
  13. Ronnie Leigh8 months ago

    My spin on the BLACKOUT Thoughtless selfish Immature ..My gripe is why harm your viewers? The tactic you’re using smacks of the behavior of bullies who exist at every age
    How I see it.. Both CBS and TWC are locking horns unwilling to flex on their respective position NO concern or respect for their public at large who remain caught in the middle of the mud slinging politics for the all mighty dollar. Either of you “the powers that be” are accepting responsibility about cause or willingness to compromise which is the healthy action to take in order to move toward a resolution. Many of your viewers cannot change their service provider there are no other available options in all locations where your consumers reside!! WE are captives until you decide to let us go free
    We are your public the people behind the scenes who become faceless to you.
    This action you have taken to abandon us to block us from access where “moments” of capturing joy and fantasy humor education, seeing people in the world come into our homes, viewing shows with characters who have become like “family”we don’t get to see or hang out with any longer brings a sense of loss we have to endure. Many of your viewing public are homebound (as am I ) affected with illness without any power over our outcome we experience helplessness every day with the loss of control over our choices. The quality of life changes from moment to moment
    Your public consists of folks who have experienced deaths of family members, child abductions and murder. News around the world is filled with violence there are wars going on over many issues the collective news is filled with haters who for all kinds of reasons just need to be right no matter the consequences ! TV informs keeps us current
    We rely on entertainment to experience some relief from a variety of all of the above and more. The process of daily living is a challenge in and of itself for many
    When each of your companies use your communication skills and are united your working relationship provides hours of escape to magical places of interest a brief get away from loss of control over health conditions and loss of the quality in the daily life of millions.For hours on end within a week entertainment is a welcome respite TV provides a vacation from feling powerless over life altering circumstances for a while despair vanishes it is thankfully replaced by choices for programs that can and do take us on a journey elsewhere.
    NOW onto your standoff For you to remain un willing to reach a resolution please know your choice to stay stuck in your current mode of resistance to come to an agreement removes hope for reconciliation this negative outcome creates an additional loss to have to cope with. On a personal level I am feeling this lock out to the core of my being To be honest it is affecting my spirit I am deeply saddened about the impact your choices are having on my life I need my energy free to fight bigger issues.
    My personal favorite viewing lineup that affords a means of escape if only for several hours a night is gone Thursday was Bing Bang night show makes me laugh the cast of characters reminds me of my kids SUNDAY is my time to spend with Dexter I have a personal investment of my time and interest in being a part of the SERIES FINALE for DEXTER After all these years I can not imagine being excluded from experiencing the end of the story line and experiencing lack of closure.
    I believe I echo the voice of many Please get out of your heads and into your hearts and do something to end the stress and the strong possibility of a revolt I feel shaping up people are angry. Bring back a source of escape your service restores balance lessens the fury Entertainment is life enhancing to be sure Thank You

    Reply
  14. Ben Dayoh8 months ago

    I am not a big fan of TWC. They were pulling that same argument regarding fees here in San Diego when in came too Fox Sport San Diego. The dispute is still going on and half of San Diego county can not watch San Diego Padres baseball because of TWC. I switched to AT&T unverse so I am happy

    Reply
  15. Al8 months ago

    Why do I as a Time Warner customer have to pay a penny to receive signals I would get for free over the air? CBS should allow Time Warner to place its local stations on the cable network for free. The local station gets it cut from the ads it sells and I as a cable customer must watch. Why do I have to pay twice?

    Reply