The complete blackout of CBS Corporation’s (CBS - Free Report) channels in New York, Los Angeles and Dallas has forced the country’s second largest cable operator Time Warner Cable Inc. to distribute indoor antennas to its subscribers.
The recent demand for higher service renewal fees by CBS has caused Time Warner Cable to drop the former’s channels from its list.
According to Time Warner Cable, CBS wants to increase its retransmission fees by a hepty 600%, which will not only drive programming costs but will also weaken margins for the cable company. Moreover, if Time Warner Cable tries to share the burden of its expenses with its subscribers through higher fees, it may result in customer loss.
Time Warner Cable and CBS Corporation haven’t reached any agreement over the fee structure yet. This delay has not only caused service disruption for an indefinite period but has also infuriated customers.
In order to retain its subscriber base, Time Warner Cable will be offering antennas either free or at a discount to subscribers at New York, Los Angeles and Dallas. However, it will be a limited offer as it will be quite difficult to distribute antennas to nearly 3 million customers. Moreover, subscribers with an over-the-air digital converter box or a TV set powered with a digital tuner will be able to access.
Time Warner Cable will be offering $20 discount coupons on antennas at selected Best Buy Co. Inc. (BBY - Free Report) stores. Moreover, the company has also tied up with Amazon.com Inc. (AMZN - Free Report) to offer gift vouchers. These gift cards will allow customers to watch CBS shows online. Furthermore, the cable giant will be offering the US Open Tennis Championship Series for free on Tennis Channel.
We believe that such alternative methods undertaken by Time Warner Cable will be a temporary solution to its longstanding problem.
Currently, Time Warner Cable has a Zacks Rank #3 (Hold).