In major markets like New York, Los Angeles, and Dallas, CBS network as well as its sister network Showtime and others have been off the Time Warner Cable line-up for two weeks. And it appears the blackout will continue. Since August 2 when extensions ended, the networks have been dropped while the advertising hasn't let up. Each blames the other for a list that seems to include digital rights and higher than normal increases in license fees. Regardless of which side you might take, the result has left consumers without their shows.
Interesting, CBS has contended that their ratings have not suffered greatly despite the drop. I'm not sure if that is good news or bad. Does that mean that Time Warner Cable customers weren't watching much CBS programming or that the rating mechanisms aren't completely factual. Argued one way, customers aren't missing much or have found work around methods to get their programming, from the purchase of digital antennas to illegal websites to get content streaming. I doubt too that consumers have dropped their Time Warner Cable service or switched quickly to other cable providers. Most consumers are likely taking a wait and see attitude to this fiasco. Certainly it is summer and new programming as well as regular season football is not scheduled till next month. Consumers might also be on vacation or spending more time outdoors than in front of their TV set. But the end result remains that this drop is part of a much larger issue that plagues all of the cable industry, programmer and operator alike.
The pressure to raise rates for content and for subscription each are hurtful to the economic model. The industry has gotten use to a two tier model of subscription and ad revenue to build its business. Yet we seem to be reaching a tipping point where consumers would rather do without and pay less or worse cut the cord completely and seek content through other channels. What the cable industry desperately needs is a third revenue arm to help absorb other costs. Operators have found revenue from cable, telephony and broadband subscriptions. Some operators are looking at security services as an additional stream of revenue.
But networks reliance on advertising and license fees for revenue now requires a third inflow. Selling to OTT operators has helped although it also competes with their current cable customer base. And that has had a negative impact on these ongoing partnerships. Those digital rights are just one of the points involved in the CBS TWC negotiations. And while networks try to raise their fees, the well is starting to go dry. Cable operators are balking and the result, they are being taken off the air. Networks must find new sources of revenue to continue to grow; reliance on raising rates won't be enough. Whether digital platforms are an answer or commerce opportunities arise remains to be seen. It is apparent that cable operators might finally be putting the brakes on excessive license fee increases.