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Time Warner Cable drops CBS in NY, LA, Dallas. Will drop Showtime nationwide.

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Cable company drops CBS stations in New York, L.A., Dallas as well as Showtime and three other cable nets nationwide after midnight Monday

Time Warner Cable said it drop local CBS stations in New York, L.A. and Dallas and will remove Showtime and three other CBS cable channels from lineups nationwide shortly after midnight Eastern time Monday, after the two sides failed to reach a distribution pact despite weeks at the bargaining table.

“The outrageous demands for fees by CBS Corporation have forced Time Warner Cable to remove several of its networks and broadcast stations from our customers’ lineups,” Time Warner Cable said in a statement. “We offered to pay reasonable increases, but CBS’s demands are out of line and unfair — and they want Time Warner Cable to pay more than others pay for the same programming.”

CBS did not immediately provide a statement.

UPDATE:
Time Warner Cable — after announcing it was removing local CBS stations in New York, L.A. and Dallas as well as Showtime and three other CBS cablers from lineups nationwide over a fee dispute — said it was holding off on going dark on the channels at CBS’s request.

The first blackout for CBS-owned stations in almost a decade shows that both sides are willing to go to the mat in the public wrestling match — despite the fact that such interruptions enrage viewers and invite scrutiny from policymakers looking to “fix” the system. CBS is intent on grabbing more revenue from pay TV operators, while TW Cable is stubbornly pushing back against hikes in programming costs.

It could be days or even weeks before TW Cable and CBS come to terms. Many analysts believe CBS has greater leverage in the dispute but have pointed out that Time Warner Cable will not feel real urgency to reach a pact until the start of the fall TV season and the start of the NFL’s 2013-14 regular season.

As of midnight Eastern time, Time Warner Cable said, customers in New York City, Dallas and Los Angeles will no longer receive their local CBS broadcast stations.  In addition, TW Cable said it was “forced to remove Showtime, TMC, Flix and Smithsonian from our lineups across the country.”

The major bone of contention in the rhetoric-laden feud is the price increase CBS has sought for the broadcast stations. Currently Time Warner Cable pays between 75 cents and $1 per subscriber monthly for CBS stations, and the Eye has likely been seeking around $2 per sub, according RBC Capital Markets analyst David Bank.

Earlier Monday at the Eye’s TCA presentation, CBS topper Les Moonves said despite “difficult” negotiations with TWC he expressed hope that “we don’t go dark.”

The previous agreement between CBS and Time Warner Cable, struck in 2009, expired June 30 but the companies extended that through Monday at 5 p.m. Eastern — then pushed it to 8, then until midnight in hourly increments — as they tried to hammer out a deal.

TWC represents no more than 3% of CBS’s total aud while the affected stations cover 25% of the cable operator’s subscriber base, according to Wall Street firm Davenport & Co.

In TV and print ads, Time Warner Cable alleges CBS is demanding more than 600% what the cable operator pays in retrans fees to independent CBS affiliates in other parts of the U.S. — an “unprecedented” premium, according to the TWC spin. The cable company has urged customers to “contact Congress” and set up a microsite at TWCConversations.com with its talking points on the dispute.

“CBS is driving up the cost of cable TV — charging higher and higher prices for shows they give away for free online and over the air,” the ads said. “It’s time to stand up and say no to broadcasters demanding unreasonable prices.”

Moonves, in a memo to CBS employees last week that was distributed to the media, said Time Warner Cable’s payments to the Eye are “out of whack.”

“It’s not like Time Warner Cable doesn’t have the money,” Moonves said in the memo.“Cable is a very, very profitable business, and Time Warner Cable can certainly afford to pay CBS a fair rate for our programming without passing any added cost on to its customers.”

CBS also has argued that it receives far less than cable channels with lower viewership. “In fact, CBS is not even in the top 10 recipients of the programming fees paid out by Time Warner Cable,” Moonves said in the memo.

Time Warner Cable has complained that CBS programming — like other broadcast TV — is available free online at CBS.com, as well as through streaming subscription services like Netflix and Amazon’s Prime Instant Video.

CBS in the last five years has reached deals with all other major pay TV operators, including Comcast, Cablevision, DirecTV, Dish, Verizon FIOS and AT&T U-Verse, according to the broadcaster — and its local stations never went dark because of a retrans dispute over that time.

Separately, TW Cable remains locked in a fight with Journal Broadcast Group, also over retrans fees. That led to blackouts of Journal Broacast’s CBS and NBC affiliates in four markets last Thursday. The operator says the station group is asking for a 200% rate hike, while Milwaukee-based Journal Broadcast says the increase is only pennies per day per viewer. The companies were continuing negotiations as of Monday.

CBS and other broadcasters are bent on boosting the revenue they earn through retransmission-consent deals. CBS execs are aiming to double the company’s retrans revenue this year to $500 million.

This year retrans payments in the U.S. will reach $3 billion, doubling to $6 billion by 2018, research firm SNL Kagan estimates. Under federal law, TV stations are allowed to demand either payment from pay TV operators for their channels or opt for “must carry,” which ensures distribution but involves no compensation.

Expect to hear more on the CBS-Time Warner Cable fight as the week unfolds. The Eye is skedded to report second quarter earnings Wednesday after market close, and TW Cable is on deck to report Q2 results Thursday morning.






all right den. which one of my angeleno ONTD peeps am i gonna be watching football with? i can't even visit my family in dallas without dis shit following me!??!?!?

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