Time Warner Cable Has Big Advantage over CBS

The dispute with Time Warner is over what it should pay to carry CBS programming. Time Warner made its case to customers:

We agreed to an extension on Tuesday morning with the expectation that we would engage in a meaningful negotiation with CBS. Since then, CBS has 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. We thank our customers for their patience and support as we continue to fight hard to keep their prices down.

And CBS made its:

Yes, that’s right Time Warner Cable has chosen to drop CBS from its channel line-up. Don’t stand by, take action now and tell Time Warner Cable enough is enough! Don’t be the only one who can’t see NCIS, The Big Bang Theory, 2 Broke Girls, The NFL on CBS, The PGA Tour, SEC Football, NCIS: Los Angeles, Person of Interest, Elementary, Hawaii Five-0, The Mentalist, The Good Wife and the final season of How I Met Your Mother. Programming That You Will Be Missing!

Time Warner Cable’s financial exposure is that a large number of its customers will cancel service. That is highly unlikely. With the hundreds of channels of programming other than CBS, subscribers are not going to drop them all because they cannot see a few channels that are owned by the broadcast network. And many cable subscriptions are bundled with broadband and VoIP, which makes the process of cutting service even more complex. Time Warner Cable has another a small advantage. It is not paying CBS for its programs during the blackout, which cuts is costs.

CBS has immediate problems with its advertisers, both at its local stations and nationally. Advertisers, obviously, do not want to pay for marketing messages that cannot be seen. CBS has stations in the two largest TV markets — KCBS in Los Angeles and WCBS in New York City.

According to Nielsen, New York City has 7.4 million households, which is 6.5% of the U.S. total. Following New York is Los Angeles at 5.6 million, which is 4.9% of the national market. It takes the next six markets in size to equal the combination of LA and New York. National advertisers cannot afford to be out of those two markets, at least not at the ad rates CBS currently charges.

CBS is in a tougher spot than Time Warner Cable during the blackout, which makes it the more likely company to give in during negotiations.