Content is key in CBS-Time Warner Cable battle

CBS Chief Executive Les Moonves
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CBS Chief Executive Les Moonves

In this corner, CBS. In that corner, Time Warner Cable. In their bout over bottom lines, content is the champ.

CBS and Time Warner Cable have been trading at multiyear highs on the heels of their earnings reports this week. The CBS results were better than expected on the top and bottom lines, thanks to digital and advertising growth.

Time Warner Cable's profits rose, but short of expectations. It also added fewer broadband subscribers than expected. In an earnings call, outgoing CEO Glenn Britt addressed rumors in light of Liberty Media's John Malone's push for mergers in the industry.

(Watch: John Malone Calls for Cable Consolidation)

"The fact that TWC has been at the center of that speculation is really an endorsement of the value of our assets in the company we built," Britt said. "Consolidation is a worthwhile endeavor, but our objective is and will continue to be to build value for our shareholders.

(Read more: Cable, content companies stop fighting: Comcast CEO)

But the real star of media earnings this season has been the increasing value of content—not just from ads, but also from growing subscription fees, like the ones Time Warner Cable pays CBS.

Plus, there's this entirely new and fast growing revenue stream for digital distribution of content from the likes of Netflix and Amazon. Pointing to a 22 percent increase in content licensing and distribution revenue, CBS CEO Les Moonves said these fees have "profoundly changed the business model for those who own the content."

He called digital revenue from streaming a "terrific growth driver."

And that reinforcement of the value of CBS' content is precisely why Moonves is standing firm in his negotiations to be paid more for his channels for subscribers in New York, Los Angeles and Houston.

(Read more: Time Warner Cable adds fewer Internet users)

"We think he who has the most eyeballs should get paid the most," Moonves said. "There are hundreds of channels but most people are watching 10 to 15 of those, and we're one of them. In many homes, we're No. 1. And most people agree with us, and we are getting paid fairly in most places."

He outlined a number of plans to more aggressively monetize the company's content—including offering content on a range of new platforms to grow revenue and pushing more into mobile distribution, where he says ad revenue grew 93 percent.

Speaking on the earnings call Thursday morning, Britt fired back, saying his goal was to ensure "reasonable" prices for subscribers.

But Time Warner Cable's disappointing results speak to its fight with CBS.

Incoming CEO and current Chief Operating Officer Rob Marcus said that one reason the company lost more video subscribers than a year earlier was its "conscious choice between rate and volume." Translation: The company focused on customers who are willing to pay more, and as a result added fewer new customers than expected.

Bottom line: High fees risk hurting subscriber numbers. And Time Warner cable is fighting to keep CBS' fees down, so it doesn't have to risk passing along higher costs to consumers or eating into its margins.

—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin