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TWC to Drop CBS Channels?

Zacks Equity Research

The recent rift between Time Warner Cable Inc. (TWC) and TV network giant CBS Corporation (CBS) may cause the former to drop CBS channels from its entire network. As a result, the cable subscribers living in New York, Los Angeles and Dallas may face complete blackouts of CBS channels.

CBS demanded higher fees from the cable giant for renewing its broadcasting contract, which expired last month. However, to avoid service disruption, both parties extended the negotiation terms until Jul 24.

According to Time Warner Cable, CBS wants to raise its retransmission fees by nearly 600%, which will not only shoot up the programming expenses but will also deteriorate margins for the cable company. Such an increase in expenditure will force the company to raise service rates, which it has done before.

The increase in rates may result in loss of subscribers for Time Warner Cable as most low-cost video streaming companies like Netflix, Inc. (NFLX) and Hulu are offering services at a rate as low as $10 per month.

Meanwhile, CBS stated that except for Time Warner Cable, all other cable, satellite and telecom companies have signed the deal with CBS.

Last year, DIRECTV (DTV) and TV network major, Viacom, Inc. (VIAB), differed on the issue of programming fees. This had led to channel blackout for DIRECTV customers. Similarly, Dish Network dumped AMC Networks channels for the same reason.

Last year, DISH Network (DISH) dumped AMC Networks channels from its program list as the former was demanding higher rates from Dish Network. M

We believe that such instances will always appear between pay-TV and Network service providers at the time of renewal of service terms.

Currently, Time Warner Cable has a Zacks Rank #3 (Hold).

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