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Marcus: CBS Fight Had Some Sub Impact

But TWC Chief Says Standoff Was Needed To Achieve Long-Term Objectives 9/11/2013 1:43 PM Eastern

Time Warner Cable chief operating officer Rob Marcus said there was likely a subscriber impact resulting from its month-long retransmission consent carriage dispute with CBS, but that the stand-off was needed to achieve its long-term goals.

Speaking at the Bank of America Merrill Lynch Media, Entertainment and Communications conference in Los Angeles Wednesday, Marcus wouldn’t give specifics on the subscriber impact, but said the loss of the top rated broadcaster in three top market as well as the loss of premium channel Showtime across its entire footprint undoubtedly caused some customers to leave.

CBS went dark to about 3.2 million TWC customers in New York, Los Angles and Dallas on Aug. 2, returning a month later on Sept. 2. While carriage fees were at the initial heart of the matter – CBS had originally wanted $2 per subscriber per month in retrans fees from the second largest MSO in the country – the battle  morphed into a fight over digital programming rights in its later stages.

“The absence of CBS O&O’s in New York, Los Angeles and Dallas and the absence of Showtime across our entire footprint, definitely had a subscriber impact,” Marcus said. “It suppressed connects on the front end and it increased disconnects  of existing customers. But the issues that were at stake in this negotiation had such significant implications and long-term implications, that we felt like we were left with  no choice. So while there was a fair amount of pain that we had to endure, at the end of the day we felt like in order to achieve our longer term business objectives, that was the only path.”

Surprisingly, Marcus said that even with the added CBS retrans fees – analysts estimated that the deal starts at $1.50 per subscriber per month and escalates to $1.90 toward the end of the deal – TWC’s total programming costs will actually be a little lower than expected this year.

TWC had said earlier that it expected programming costs per subscriber to rise by 10% this year. Now, Marcus said, the expected increase is about 9%.

TWC also incurred some costs during the fight – paying for antennas for some subscribers to watch CBS programming over the air, issuing customer credits like free movies and gift cards, marketing , as well as paying for programming like the Tennis Channel and others that filled the CBS slot during the blackout,  Marcus said it was well worth it.

“While those are short-term hits that are not insignificant, we felt that it was  justified based  on the goal  of achieving longer term objectives,” Marcus said. “At the end of the day it is fair to say we ended up in a much better place than we started. You chalk it up to the achievement of your ends.”

One long-term objective that Marcus would like to see for the entire industry is a rewrite of the 1992 Cable Act, which gave the nation retransmission consent.

Marcus pointed to a recent bill proposed by U.S. Rep. Anna Eshoo (D-Calif.), which addresses many of TWC’s concerns, including the unbundling of broadcast and cable networks during carriage talks.

“Whether or not that legislation in anything that looks like its current form becomes law is an open question, it’s starting the dialog,” Marcus said. “We’re getting to the place where we’re getting appropriate enough attention on the fact that this existing legislation just doesn’t work

 

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