3Q Earnings Takeaways – The Effects of the CBS/TWC Dispute

One of the biggest stories of third quarter was undoubtedly the month-long blackout of CBS programming in Time Warner Cable markets. The abysmal 306,000 video sub losses for TWC were well reported, but what other nuggets were there in 3Q earnings that related to the dispute? Here’s a rundown.

• TWC stands by its assertion that while painful in the short-term, it is better off in the long run. “That doesn’t mean the deal is cheap, it doesn’t mean it’s wonderful, but we do think it is better than it would have been in a meaningful way,” CEO Glenn Britt said during the MSO’s earnings conference call. Did it move the needle for retrans reform on the Hill? Britt doesn’t think it’s on top of anyone’s agenda in Washington, but at some point, he believes the 20-something year-old rules will change “in ways that we can’t necessarily anticipate.”

• CBS also feels good about the outcome, with retrans up 50% year-to-date. CEO Les Moonves doesn’t see Hill action on retrans now or down the road. “Every time there’s a dispute, when you go off the air, there’s some more activity there… We don’t think it’s going to happen soon or longer-term,” he said of reform. “We think it’s better that the government stays out. And every indication that we have is that they will stay out.

• With Showtime off in all TWC markets during the spat, Starz and Encore got to step in as replacement programming. Starz CEO Chris Albrecht said it certainly helped to increase the programmer’s visibility, but whether it had any impact on financials is impossible to say. Starz hit 22mln customers in 3Q, a 1st in its history. It added about 200K subscriptions in the Q, while Encore was flat, ending the period with 35mln subs.

• DirecTV’s 139,000 net additions in 3Q reflect a “modest benefit” from the TWC-CBS dispute (as well as DISH-Raycom’s retrans showdown). Pres/CEO Mike White stressed the modest, saying it was less than 5% of the satellite provider’s gross adds. And DirecTV will continue its policy of not running marketing aimed at a competitor’s subs during these standoffs. “I made a policy decision a couple years ago that we would not try to take advantage of these circumstances. I don’t think it’s in any distributor’s interest to do so,” White said. “I just don’t think it’s smart because what goes around comes around on these programming disputes.”

• Verizon, which signed a deal with CBS while the TWC dispute was in place, also saw a positive impact on subs. FiOS gained 135,000 video customers in the quarter. “Some of these adds came from some of the disputes that happened…, but still even without that we would have seen an increase year-over-year in our productivity and our penetration of FiOS,” said CFO Fran Shammo.