UPDATE 1-Time Warner Cable offers proposal to CBS to end blackout
Aug 5 (Reuters) - Time Warner Cable Inc Chief Executive Glenn Britt sent a letter to CBS Corp 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.
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 such as golf that airs on CBS.
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.
"Rather than our debating the point, we would allow customers to decide for themselves how much value they ascribe to CBS programming," Britt said.
Time Warner Cable said it is waiting for CBS to accept or reject its proposal.
"CBS received Mr. Britt's 'offer' simultaneous with its release to the media. We are formulating our response," CBS said in a statement.
Media companies like CBS and its rivals sell packages of channels known as bundles to operators, a common practice in the cable industry. CBS cable channels such as Showtime also went dark in the dispute because the company negotiates its programming deals in one bundle.
Letting customers cherry pick the channels they want would cut into revenue of media companies. Needham & Co analyst Laura Needham estimated in July that the cable industry including media content providers could lose 50 percent of its revenue, about $70 billion, if the a la carte was widely adopted. She added that only 20 channels would likely survive.
Time Warner Cable said CBS could choose the pricing it wants for a la carte channels and then collect all the revenue.
BTIG analyst Rich Greenfield said that "a la carte is never going to happen" and that Time Warner Cable is just trying to show the public "CBS is unwilling to negotiate."
Time Warner Cable offered to increase its fees it would to pay to CBS but it did not elaborate on the specifics in the letter. A Time Warner Cable spokeswoman decline to comment on the amount.
RBC Capital Markets analyst David Bank estimates that CBS currently receives $1 per month, per subscriber and is seeking to double that to $2 per subscriber.
The latest proposal from Time Warner Cable would not include a deal for digital rights, which it said CBS had provided to other cable companies. Those rights include CBS's premium channel Showtime's digital app, which competes with HBO GO, said a source familiar with the matter said the proposal.