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CBS Warns Of Possible DirecTV And AT&T U-Verse Blackouts As Deadline Nears – Update

Dade Hayes

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UPDATED again with expanded AT&T statement. CBS sent the first shot across the bow in a widely watched carriage fight with AT&T and its DirecTV, DirecTV Now and U-Verse pay-TV platforms, but AT&T then returned fire.

A press release from CBS asserted that the company is negotiating “resolutely and in good faith” with AT&T ahead of an 11PM PT deadline on Friday. “CBS has reached timely, fair agreements with hundreds of other cable, satellite, telco and internet providers to carry our industry-leading, fan-favorite programming,” the company said. “AT&T, however, continues to propose unfair terms well below those agreed to by its competitors and may drop CBS unless we agree to those terms.”

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Affected markets include New York, Los Angeles, Chicago, Philadelphia, Dallas, San Francisco, Boston, Atlanta, Tampa, Seattle, Detroit, Minneapolis, Miami, Denver, Sacramento, Pittsburgh and Baltimore.

AT&T, which took on a massive amount of debt to acquire Time Warner for $81 billion, is also still at odds with Nexstar, the No. 2 local TV company. Nexstar stations have been dark since early this month. Those two parties reconvened at the bargaining table last weekend and remain in talks.

Nexstar

In its own press release, AT&T addressed both ongoing disputes. “We are fighting on behalf of our customers in these negotiations with broadcast station owners and national networks,” the company maintained. “Customers today are demanding more value from their TV offerings. We must convince companies like CBS and Nexstar to accept the same call to action that our own TV customers have made clear.”

The release attacked the practice of broadcasters of emulating cable’s dual revenue stream, collecting money from advertising and then continuing to ramp up retransmission consent fees even as linear ratings erode. It pointedly endorsed the Locast app (available in nine of the markets at risk of blackout) and urged viewers who don’t want their broadcast signals interrupted to seek them out the old-fashioned way, via an antenna.

Locast is a non-profit organization that enables local broadcast stations to be viewed digitally within their regions. BTIG analyst Rich Greenfield, in a report last week, signaled his view that Locast (which just got a $500,00 donation from AT&T toward its expansion) is a game-changer. “While Locast is unlikely to end the need for AT&T to pay retrans, having an easy solution to offer subscribers access to blacked-out channels on the exact same set-top boxes during carriage disputes would appear to meaningfully shift/balance negotiating leverage,” he wrote.

The number of blackouts prompted by broadcasters, AT&T contends, is at more than 200 for 2019 to date, already well ahead of the 165 reported for all of 2018. It said federal legislation could be one remedy, and “fortunately Congress has taken more interest,” according to the company. “But the best option is to create mutually beneficial relationships with broadcasters like CBS and Nexstar through good-faith negotiations.”

In the view of CBS, “AT&T’s willingness to deprive its customers of valuable content has become routine over the last few weeks and months, and recent negotiations have regularly resulted in carriage disputes, blackouts and popular channels being removed from their service,” the company said.

With the most-watched broadcast network, CBS historically has had a strong hand to play with distribution partners, especially as summer turns toward fall and college and pro football return to the airwaves. In 2013, for example, Time Warner Cable lost 306,000 customers and had to issue $15 million in credits to customers after battling CBS on the eve of football season and during the U.S. Open of tennis, a longtime ratings magnet before it moved to ESPN.

Today, though, the marketplace has evolved with the advent of streaming. Some carriage disputes have hardened into long-term strategic shifts. Dish Network, for example, failed to reach agreement with HBO last October and the premium channel remains dark on the satellite operator’s systems. Dish customers can avail themselves of stand-alone service HBO Now for $15 a month, an option that has only been available since 2015.

This year’s summer slate on CBS looks a bit different than it has in past years. For one thing, golf’s PGA Championship moved up to May from its longtime August berth. NFL broadcasts begin on September 8 and SEC football kicks off September 14. Through August 7, the main CBS primetime attraction will be Love Island, whose U.S. version debuted to soft numbers last week as it began a five-nights-a-week run.

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