After CBS Corp. (NYSE:CBS) threatened to pull programming from Time Warner Cable (NYSE:TWC), the two companies have come to a short-term contract extension so that Time Warner customers won’t lose access to CBS on Wednesday night, when the current agreement was set to end.
The two companies have been fighting over retransmission fees, which are fees networks charge pay-TV providers to rebroadcast signals. The fees are relatively new, and according to a statement from Time Warner seen by Bloomberg, CBS is asking 600 percent more for the fees than its rival networks. CBS fired back, saying that Time Warner refused to negotiate a similar deal that CBS has reached with other pay-TV providers.
A Time Warner Cable spokesperson told CNET on Wednesday night that the companies had reached an agreement that will allow Time Warner to continue to carry CBS programming until July 29 at 2:00 pm Pacific Time, while the two companies continue to negotiate an agreement. Three million Time Warner customers stand the risk of losing programming from CBS and other channels the network owns, like Showtime and TMC.
CBS has been aggressive about using its number one network status to pursue high retransmission fees. Pay-TV providers feel trapped into paying what CBS asks for, because if their customers lose CBS’s popular programming, it could trigger them to switch to a rival service.
CBS began running ads in New York, Los Angeles, and Dallas last week, warning Time Warner customers that they could lose access to CBS programming. Time Warner responded by publicly recommending its customers use the controversial start-up streaming service Aereo to access CBS shows. Aereo uses an antennae and a DVR to allow people to stream live and broadcast TV from internet-connected devices. Aereo has been sued by every major network in the country over its refusal to pay retransmission fees.
Contract disputes between networks and TV providers have become increasingly common. Networks used to have the upper hand in the arguments, as they have the programming that viewers are paying to watch, but providers are now more resistant to automatically paying whatever a network asks for than they have been in the past.
CNET cited a couple other instances in which negotiations between pay-TV providers and networks broke down, including DirecTV (NASDAQ:DTV) losing programming from Viacom (NYSE:VIA) when the companies couldn’t reach an agreement last summer, and Dish Network (NASDAQ:DISH) dropping AMC Network (NASDAQ:AMCX) channels for four months while fees were negotiated. A similar blackout of CBS shows could occur for Time Warner Cable subscribers, if the companies can’t reach an agreement by the end of the month.
Follow Jacqueline on Twitter @Jacqui_WSCS
Investing Insights: Is AT&T Stock Undervalued?