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CBS Eyes New Deals

2/23/2007 7:08 PM Eastern

Crowing about the start of “a new paradigm,” CBS appears to have succeeded in scoring cash payments from nine smaller cable companies for permission to retransmit the signals of its TV stations.

But two other broadcasters will likely face a much tougher time this week, as they try to extract cash compensation for their stations from Comcast and Cox Communications.

Those two large cable operators, ranked Nos. 1 and 4 in size, each have retransmission-consent pacts with TV-station owners that expire later this week. In theory, if new agreements aren’t reached or additional extensions are not granted, Comcast could lose carriage of Sinclair Broadcast Group-owned stations and Cox could lose the right to retransmit a New Orleans station belonging to Belo Corp. Negotiations are ongoing in both cases.

In the past, Comcast and Cox have been vocal about their reluctance to pay cash compensation to carry the signals of TV stations. In 2005, Cox lost carriage of Nexstar Broadcasting Group stations for most of the year over that issue.

Deals to Watch
Retransmisson-consent agreements about to expire:
March 1
Cable operator: Comcast
Station operator: Sinclair Broadcast Group
What happens: Retransmission-consent extension expires
TV stations involved: More than 30 in 23 markets
Cable subscribers affected: 3 million
Signals under discussion: Analog and digital
March 2
Cable operator: Cox Communications
Station operator: Belo Corp.
What happens: Retransmission-consent extension expires
Cable subscribers affected: 183,000
Signals: CBS affiliate WWL-TV, WWL-TV HD and NewsWatch 15, a newschannel, all in New Orleans.

NEW PRECEDENT

So it remains to be seen if the new CBS deals, which CEO Les Moonves triumphantly hailed, will set a precedent followed by larger cable operators, with millions of subscribers — or whether the deals will only have a bearing on negotiations with smaller operators, who may have just 100,000 subscribers or fewer to bargain with.

After literally years of Moonves calling for cash for his stations, last week the Tiffany Network finally announced it had new retransmission-consent deals with nine unidentified cable companies. The nine deals covered a total of 1 million cable TV subscribers who can watch CBS owned-and-operated stations.

Moonves has publicly said he would seek the equivalent of a 50 cent per-month, per-subscriber fee from cable operators for CBS stations. But, to date, there is no public confirmation from CBS or any other party of the exact amount of cash being paid by any of the cable operators under the agreements announced Thursday.

That sets the stage for this week’s events. Comcast has a retransmission-consent extension from Sinclair Broadcast Group that expires Thursday (March 1).

“We are continuing to work with Sinclair to reach a fair agreement,” Comcast senior director of corporate communications Jenni Moyer said last Friday.

As a precaution, and in line with federal law, Comcast has already notified its subscribers in Sinclair markets that they may be losing those TV stations. That negotiation involves more than 30 Sinclair TV stations reaching roughly 3 million subscribers in 23 markets, including Pittsburgh, Minneapolis-St. Paul, Minn., Nashville, Tenn., Richmond, Va., and Tampa, Fla.

“These things, a lot of time, come down to the wire,” Sinclair general counsel Barry Faber said. “I like to think about getting deals done and that’s what I’m hoping we’ll be able to accomplish in the next week.”

Like CBS, Sinclair has been vocal about demanding cash for its stations and recently succeeded on that score. The broadcaster just concluded a very nasty, public retransmission-consent fight with Mediacom Communications.

Sinclair pulled 23 stations from Mediacom for a month before reaching a deal on Feb. 2 in which the cable operator is reportedly paying per-subscriber license fees for the broadcaster’s stations.

CBS's 'New Paradigm' Deals
Who and what's involved in the retransmission consent agreements CBS Corp. made last week:
Source: Multichannel News research
Number of cable operators: Nine, unidentified
Number of cable TV subscribers, in total: 1 million
TV stations: CBS owned-and-operated CBS stations
Markets where CBS owns and operates stations: New York, Los Angeles, Chicago, Philadelphia, Boston, San Francisco, Dallas, Detroit, Minneapolis, Miami, Denver, Sacramento, Calif., Pittsburgh, Baltimore, St. Lake City, Austin, Texas, and Green Bay, Wis.
Covers: Analog, digital, multicast and HDTV signals

Cox’s looming retransmission-consent deadline involves just one market. Belo Corp. has granted Cox, with its 183,000 subscribers, an extension until Friday, March 2, to continue carrying its CBS affiliate in New Orleans, WWL-TV. The Belo-Cox retransmission-consent negotiations involve the station’s analog and HD signals, as well as a news channel, NewsWatch 15, which reruns the station’s newscast.

“The issues are consistent with those across cable and broadcast negotiations, and I think they’re going to be resolved,” said WWL president and general manager Bud Brown.

CBS tried to position its deals with the nine cable companies as establishing a template.

“Clearly, there is a new paradigm in the marketplace — one that recognizes the value of the content that we bring to our various audiences,” Moonves said in a prepared statement. “This is a trend that bodes well for us going forward as future retransmission deals are negotiated.”

CBS spokesman Dana McClintock declined to name the operators the company reached agreements with, citing “confidentiality” — a sign of how touchy retransmission-consent payments are within the cable industry.

When asked about the terms and whether cash is involved, McClintock would only say, “We’re receiving value.”

NOT SO FAST

One industry executive familiar with the negotiations said CBS was receiving cash for carriage, much as it did nearly a year ago in a retransmission-consent pact with Verizon. CBS reportedly garnered monthly license fees of 50 cents, per-subscriber, in that agreement.

But several Wall Street analysts and at least one broadcaster were skeptical that CBS was getting just cash from these operators. Part of the compensation, or “value,” could be barter advertising time, for instance.

Assuming a 50-cent license fee, the investment firm Bear Stearns & Co. estimated that will create $6 million in annual revenue for CBS and open the door for a lot more down the line.

“CBS can capture $155 million to $175 million in retrans fees, making CBS one of the broadcasting industry’s greatest retrans beneficiaries,” Bear Stearns analyst Victor Miller wrote last week.

In its report, Bank of America said “the market value for broadcast retransmission rights won’t really be determined until CBS’s agreements with the largest cable operators come up for renewal starting in ’09-’10.”

NOT SO BIG

Some Wall Street analysts believe neither the Sinclair-Mediacom deal, nor last week’s CBS deal with smaller cable companies, will set any kind of precedent for a giant cable operator like Comcast.

For example, Craig Moffett, a Sanford C. Bernstein & Co analyst, stressed that Mediacom’s position with Sinclair is very different than that of Comcast.

“The pain to the broadcasters is felt immediately, in the form of lost advertising revenue, if they’re losing a big piece of the marketplace,” Moffett said. “Mediacom’s problem was it simply didn’t account for enough of Sinclair’s distribution to stand toe to toe with Sinclair at the bargaining table. The negotiation with Comcast is completely different.”

The Sinclair stations involved in the Comcast deal represent one-third of the broadcaster’s ad revenue, according to an individual familiar with negotiations.

Faber declined to comment on what Sinclair is specifically seeking from Comcast.

Cox and WWL reached a retransmission extension Jan. 31, which kept the CBS affiliate — and Super Bowl XLI — on the air for the cable system’s subscribers. Neither Cox nor WWL’s Brown are commenting on details of their talks, but one of the hangups is reportedly the financial terms for WWL’s HD channel, which Cox isn’t currently carrying.

September