CBS Sending Big Message To Affiliates

John Seward
August 13, 2014

CBS (NYSE: CBS) is sending a message to its affiliates: Pay up or get out.

In an apparent dispute over fees for sports and prime-time programming, CBS on Monday pulled the plug on Lin Media (NYSE: TVL) in Indianapolis and will move its broadcasts there to Tribune Media's (OTC: TRB) WTTV-TV.

Broadcasters dependent on CBS for programming extended earlier losses and saw shares dropping Wednesday.

"If a local affiliate balks at CBS's demands, the affiliate must recognize that other stations might step up to take over," RBC Capital's David Bank said in a research note.

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CBS Chief Executive Leslie Moonves signaled that the company was seeking higher fees in a conference call with analysts last week.

"We decide what we think is fair," said Moonves. "The station groups are all doing very well, primarily because of network programming both in primetime and in sports."

In the recent quarter, CBS' affiliate and subscription fees grew 7 percent to $586 million, while total revenue fell 5 percent to $3.19 billion.

Media General (NYSE: MEG), set to acquire Lin,continued to see its shares drop and were trading down 2.67 percent. Nexstar Broadcasting (NASDAQ: NXST), which is heavily dependent on CBS, saw its shares fall by 2.5 percent. Gray Television (NYSE: GTN), down 2.7 percent, has nearly half of its 40 TV channels dependent on CBS.

Sinclair Broadcast (NASDAQ: SBGI), where nine of its roughly 70 stations are CBS affiliates, extended steep losses from Tuesday and saw its shares drop another 1 percent Wednesday.

CBS was trading around $59.06, up 0.25 percent.

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