U.S. broadcaster CBS went dark for millions of Time Warner Cable subscribers on Friday in the nation's two largest markets after the cable operator and the network's parent company CBS Corp failed to reach an agreement over fees after weeks of contentious negotiations.
The blackout by Time Warner Cable of the No. 1 rated U.S. broadcast network followed an increasingly hostile and public battle between the two sides, which accused each other of making unreasonable demands in their talks over how much the cable operator will pay to carry CBS.
CBS, home to hits such as "The Big Bang Theory" and "NCIS," has never been dropped by a cable TV system, it said. An estimated 3.5 million customers are affected, including those in Los Angeles, New York and Dallas.
A source familiar with CBS' negotiating strategy said the company had offered to extend current terms and keep negotiating in the coming days. No new talks between the sides are scheduled, said the source who asked to be anonymous because the talks are private.
Time Warner Cable spokeswoman Maureen Huff said the operator offered a one-year extension before it blacked out the channels.
The companies issued dueling statements on Friday as Time Warner Cable began dropping CBS and its cable networks, including Showtime, from the company's systems in those markets.
The cable operator said it had agreed to extend talks until Tuesday morning but CBS "refused to have a productive discussion."
"It's become clear that no matter how much time we give them, they're not willing to come to reasonable terms," Time Warner Cable said. It thanked customers for patience "as we continue to fight hard to keep prices down."
CBS shot back that Time Warner Cable "conducted negotiations in a combative and non-productive spirit, indulging in pointless brinkmanship and distorted public positioning." It said Time Warner Cable had taken more than 50 channels off the air over the last five years.
The network "is eager to make an agreement in line with the kind it has struck with every other cable, satellite and telco provider, and has continually sought reasonable term extensions to get that job done," CBS said.
The threat of blackouts have become increasingly common as networks, which provide programming, square off against cable operators that pay "retransmission fees" to transmit those programs into living rooms around the country.
The battle with CBS, one of the industry's toughest negotiators, represented a "once in a lifetime opportunity to go dark and fight (retransmission) fees," BTIG analyst Rich Greenfield said. "Time Warner had to do it," he said.
CBS is seeking a monthly fee of $2 per subscriber, said RBC Capital Markets analyst David Bank, up from about $1 currently.
"Compared to others who get $1 per (subscriber)," they've spent four to eight times as much on content," Bank said. "We think they'll prevail."
The blackout was the latest showdown between a broadcaster and a cable or satellite operator to break down, leaving subscribers of those services without their favorite programs.
Last summer, satellite operator DirecTV's 20 million customers were unable to see more than 20 of Viacom's cable networks, including Nickelodeon and MTV, for 10 days after those companies failed to strike a new deal.
Fox went dark for more than 3 million Cablevision customers in 2010. The two settled on October 31, 2010, restoring service for three Fox-owned TV stations, Fox Business Network, the National Geographic and other channels.
Cablevision blamed the 15-day blackout, which deprived its customers of most of the World Series, for the loss of many of the 35,000 subscribers who gave up their cable subscriptions during that quarter.
The CBS blackout caps weeks of aggressive marketing staged by both companies to get the public on their side. In TV commercials airing in the markets involved in the dispute, Time Warner Cable accused CBS of giving New York a "black eye," while CBS urged viewers in its own spot to "say no to Time Warner Cable," and gave them Time Warner Cable's phone number.
The loss of advertising dollars is relatively less painful during the summer, when networks air mostly reruns and audience numbers drop. If the blackout persists into August, however, CBS could lose audiences in the some of the largest U.S. markets for reliably popular National Football League games.
CBS Chief Executive Leslie Moonves, a former actor who played the heavy in crime shows like "Cannon," is one of the industry's toughest negotiators. He told analysts during a May 1 earnings call that CBS intends to generate $1 billion annually in retransmission fees from cable and satellite companies by 2017, "if not before."