New deadline lets CBS, Time Warner keep talking

(MoneyWatch) The deadline in a dispute over fees between CBS Corp. (CBS) and Time Warner Cable (TWC), has been extended until Friday, giving both sides more time to negotiate over retransmission rights signals from CBS-owned stations.

Time Warner said Monday night that it had dropped CBS programming in various markets. It then quickly reversed the decision, and at 5 a.m EDT Time Warner Cable issued a statement saying that the it had agreed to extend talks with CBS until Friday at 5 p.m. EDT.

The extension came after both sides had negotiated unsuccessfully through the day to avoid a programming blackout. At around 9 p.m. EDT, Time Warner Cable said about 3 million customers in eight markets, including New York, Los Angeles and Dallas, would lose the network and four CBS cable stations because of what it called "outrageous demands for fees" CBS is seeking for its programming.

"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," Time Warner Cable said in a statement. The company argues that it will have to pass on higher fees to its customers.

CBS has argued that Time Warner Cable is pursuing a "short-sighted, anti-consumer strategy."

"As we've said, we feel like we should be paid for our programming," CBS chief executive Les Moonves told the Television Critics Association on Monday.

The current fight is only the latest between a network and a cable company over so-called carriage fees. In October of 2011, for example, Fox and DirecTV concluded acrimonious negotiations during which DirecTV threatened to dump Fox channels including FX, National Geographic and regional sports networks. The two sides finally reached a settlement, the terms of which were undisclosed. Fox was said to have been seeking a fee increase of at least 40 percent for its content.

In recent years, Time Warner Cable also has clashed with Hearst, ABC and Fox over fees.

"The balance of power has been shifting away from the distributors to the content guys, who are typically getting increases -- maybe not the full amount that they're after but more than the carriers want to pay," said Michael Corty, a senior equity analyst at Morningstar. "Both sides come in with negotiating power, but the content guys have been able to pass through these increases."

CBS's public statements seem to reflect that shift. "In the end, of course, an agreement will be reached," CBS said last night in a statement when it appeared the blackout was beginning. "We continue to hope that outcome may be achieved very soon and we can get back to focusing on delivering great content to the customers we share."

In the short term, the fight comes at the slowest time of year for the industry -- before football season and the debut of many new shows in the fall, and as many people are on summer holidays. In the longer term, such standoffs portend rising tension among distributors, program creators, and the alternative universe of online streaming companies.

For example, CBS has been doing battle in court, so far unsuccessfully, with streaming service Aereo, which uses huge antennas to gather television signals and then retransmit them to people on computers for a monthly fee.  CBS argues that taking its signal and retransmitting it is illegal.

While the rise of such services is seen as a direct challenge to programmers like CBS, it also could be seen as a threat to cable companies, which may well lose viewers to technologically savvy viewers seeking an alternative to paying a higher monthly fee for a slew of cable offerings, many of which they don't want. Time Warner Cable has said that in the case of a blackout of CBS programming, it would urge customers to adopt Aereo and get CBS programs that way. 

"If you're Time Warner Cable, you'd better be careful saying things like that," Corty said.

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