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CBS To Demand Fees From Cable Cos.
Michael Learmonth, Variety.com,
June 07, 2005 |
NEW YORK - Days after taking the upfront sales crown, CBS is looking to cable operators for its next treasure trove.
The chairman of CBS, a unit of Viacom, Leslie Moonves, told Wall Street on Monday that after the split-off from Viacom the network will be in a better position to demand fees from cable operators, which currently carry the CBS signal for free.
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"Cable operators are not happy with my saying this, but it's a new day, and I want to be paid for my great programming," Moonves told bankers and analysts at the Deutsche Bank media conference in New York.
Moonves said he expects the split-off to be approved at a board of directors meeting this summer, and he made a forceful argument for the viability of a stand-alone group of assets clustered around the CBS television network.
"I'm very confident that this team will be accepted on Wall Street and on Madison Avenue," he said.
A central rationale for merging CBS and Viacom's cable networks in the first place was to use the network as leverage to get favorable carriage deals for cable networks such as MTV, VH1, Comedy Central and Spike.
But now that Viacom's cable networks have strong leverage on their own, CBS will be better off negotiating as a stand-alone company, Moonves said.
"If we become independent, we will be able to negotiate on our own without MTV being part of it," he said.
Furthermore, he said, cable operators should help pay for the cost of producing and acquiring programming. "We invest a lot of money in the NFL, in David Letterman and in CSI," he said.
Should the split go forward, CBS would be the only network not joined to a conglomerate with significant cable assets. CBS will retain Showtime, because the Paramount TV studio will be best positioned to generate the kind of original series that have fueled HBO in recent years.
Mother Of All TV Battles
Moonves' retransmission stance, which he first made public in April, could launch the mother of all TV battles, as cable operators aren't likely to open their wallets with a smile.
"Obviously, it's in our interest to resist that, so we'll have tough negotiations on our hands," Time Warner (nyse: TWX - news - people ) Cable Chief Glenn Britt said in a presentation at the same conference later Monday.
Indicating potential pressure points, he said broadcasters have been "slow in giving spectrum back" to the government as they shift from analog to digital, and he noted the current focus on broadcast indecency. "So it's probably not a great idea for the broadcast industry to start getting" aggressive on retransformation, he said.
That cable companies don't pay for broadcast signals is a tradition held over from when cable was primarily used to deliver TV to rural areas, out of reach of broadcast antennas.
Satellite operators and now telecom companies such as Verizon Communications (nyse: VZ - news - people ) and SBC Communications (nyse: SBC - news - people ) pay fees for the use of broadcast signals, and Moonves believes cable operators should, too. "We believe that's in our future," Moonves said.
Some cooperation between MTV Networks and CBS would continue post-split, such as multiplatform ad sales through Viacom Plus and agreements to cross-promote cable and network shows.
But in reality, Moonves said, while he likes MTV head Tom Freston, "We speak very infrequently. There is very little business that we do together."
Beyond retransmission fees, Moonves said other sources of additional revenue include DVD sales, Internet ad sales and syndication.
The UPN network should become profitable this year, he said, especially if it finds success with Everybody Hates Chris, one of the most highly anticipated pilots of the coming TV season.
Jill Goldsmith contributed to this report.
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