CBS rejects TWC proposal to end blackout, calls it 'a sham'
Time Warner Cable Chief Executive Glenn Britt had sent a letter to CBS CEO Les Moonves on Monday offering a controversial new proposal to end the blackout of CBS shows that started Friday in markets such as New York and Los Angeles.
Britt said that Time Warner Cable could offer customers the chance to pay for the CBS network on a standalone basis, known as the "a la carte" model, which is viewed as a risky proposition in the U.S. cable industry.
"It's the best way to find out what customers want to pay for individual programming," incoming Time Warner Cable CEO Robert Marcus said on CNBC's "Street Signs," adding that under such an arrangement CBS could set its own terms and collect 100 percent of fees. "It takes us out of the middle of it."
CBS quickly shot back.
"Today's so-called proposal is a sham, a public relations vehicle designed to distract from the fact that Time Warner Cable is not negotiating in good faith," CBS said in a statement. "Anyone familiar with the entertainment business knows that the economics and structure of the cable industry doesn't work that way and isn't likely to for quite some time. In short, this was an empty gesture from a company that is expert at them."
The letter is the latest development in a contentious public battle between the No. 1 rated U.S. broadcast network and the no. 2 cable provider that has left millions of customers unable to watch the summer hit "Under the Dome" and live sports that airs on CBS such as golf.
Earlier, Time Warner Cable had extended two proposals to Moonves. One would allow immediate resumption of carriage "under the economics that Time Warner Cable reluctantly agreed to during our negotiations," the letter TWC sent to CBS said, although digital rights that CBS has provided in other markets would not be included.
Media reporter Brian Stelter of The New York Times said on "Street Signs" that the latest a la carte offer was likely a negotiating tactic, not a sincere offer that stood any likelihood of happening.
Meanwhile, millions of Time Warner Cable subscribers in New York, Los Angeles and Dallas could be without CBS programming for several weeks if the two companies find themselves no closer to settling the fee dispute, analysts said.
The blackout that began on Friday, when Time Warner Cable dropped the No. 1-rated U.S. broadcast network, has affected an estimated 3.5 million customers, including golf fans who missed Tiger Woods' victory in the Bridgestone Invitational on Sunday.
CBS, home to hits such as "The Big Bang Theory" and "NCIS," said there were no talks taking place at the moment, but the company remains "ready to negotiate in good faith." Time Warner Cable said it regretted the inconvenience to viewers and hoped to resolve the situation "as soon as possible."
(Read More: Time Warner Cable drops CBS in New York, Los Angeles)
Industry analysts said the dispute over how much Time Warner Cable should pay to carry CBS could last until the start of the National Football League season in September, when millions of viewers rely on their cable providers to watch primetime games.
"Until the NFL games are on CBS, I can see this dragging on," said Chicago-based Morningstar analyst Michael Corty.
The fall is also when many new season shows kick off.
"The longer (CBS) waits, the more they don't get a chance to promote their fall lineup in the two biggest cities in the country," BTIG media analyst Rich Greenfield said.
CBS begins its fall lineup with the Sept. 18 premiere of reality contest "Survivor." Other CBS primetime shows start their seasons beginning Sept. 23
The disruption, which followed weeks of contentious talks, has drawn the attention of some local politicians.
New York City mayoral candidates City Comptroller John Liu and City Council Speaker Christine Quinn have taken both Time Warner Cable and CBS to task over what has become an increasingly vitriolic and public fight.
Liu said in a statement that both sides had shown "near total disrespect" for cable subscribers and urged the companies to not use New Yorkers as "pawns" in their negotiations.
In the United States, localities regulate the rates cable television providers can charge consumers for basic cable.
If the blackout continues, the U.S. Federal Communications Commission and lawmakers will likely weigh in, analysts said.
"If you start hearing rumblings from the Senate, the House and the FCC, that's where you could really start to feel pressure to make something happen here," said Greenfield. "Barring the government looking into this, I don't think there's any reason for either side to move."
Programming blackouts have become increasingly common in the United States as TV networks square off against cable or satellite service providers that pay "retransmission fees" to transmit programs into living rooms around the country.
Last summer, satellite operator DirecTV's 20 million customers were unable to see more than 20 of Viacom's cable networks for 10 days. Fox went dark for 15 days for more than 3 million Cablevision customers in 2010.
DirecTV on Saturday sided with Time Warner Cable, commending the cable provider's decision to drop CBS programming.
(Read More: DirecTV sides with Time Warner over CBS dispute)
CBS has fought back against Time Warner Cable by suspending videos of full episodes on CBS.com for customers with Internet access provided by the cable company in affected markets.
"Before the deadline on Friday, we asked TWC to continue the negotiation while our programming was still on the air," CBS said in a statement. "They rejected this request and told us that they'd have more leverage against us if they took us off their service."
Some sports-starved subscribers took matters into their own hands. "I had to hook up an antenna to get the local off air," said Los Angeles resident Lou Furman, one of the many sports fans impacted by the blackout.
"I did it strictly because I wanted to see the golf tournament," Furman said. "I've got it all hooked up but it's inconvenient."
—By Reuters and CNBC.com.