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The Time Warner Cable/CBS Dispute: An Epistolary Debate

By Rich Heldenfels Published: August 6, 2013

Here's an exchange of letters between Time Warner top man Glenn Britt and CBS CEO Leslie Moonves regarding their ongoing cable-carriage dispute. I have to say I like Moonves's letter a lot better both because it is such a takedown and because it is so very, very Moonves.. Anyway, Britt's first, from Business Wire:

Dear Les,

In the interests of getting CBS back on our cable systems today, we write to propose that CBS and Time Warner Cable immediately agree to resume carriage with the new economics TWC reluctantly agreed to during our negotiations, while employing all the other terms and conditions of our recently expired contracts. Although those terms are not ideal to CBS or TWC, and would leave TWC and our customers without the digital rights that CBS has provided to others, since both parties have lived under those terms productively for many years, we believe we should continue to live with them in the interest of restoring CBS immediately for the benefit of consumers.

Alternatively, if you are unwilling to agree to this proposal, we would also be willing to resume carriage by allowing CBS to make its stations available on an a la carte basis at a price and on terms of its choosing, with 100% of that price remitted to CBS. This way, rather than our debating the point, we would allow customers to decide for themselves how much value they ascribe to CBS programming.

In connection with both of these proposals, we would expect you to allow us to immediately resume carriage of your CBS stations (and other CBS-programming services) on retroactive terms as we work out any necessary details. The extension would be ongoing to make sure consumers are not once again held hostage by CBS during this process. We expect, though, that since each of our proposals is very straight forward, the papers can be completed quickly.

Finally, we call on CBS regardless of whether it accepts or rejects our proposals, to immediately cease its blocking of CBS.com content from TWC’s high-speed Internet customers. Regardless of the other issues between us, it is surely beyond the pale for you to subject these Internet customers to blocking of content that is made available for free to all others. This is especially so given that CBS uses free public airwaves to broadcast that content and has public interest obligations that it is plainly flouting. In addition, this conduct is abhorrent in that CBS is using this blocking to punish TWC’s Internet customers across the country, including millions of consumers in cities where we continue to carry CBS on our cable systems through agreements with other CBS-affiliated stations; is blocking customers of other multichannel providers, including Direct TV, with whom CBS has no dispute; and is apparently blocking customers of certain other ISP’s, to which TWC provides wholesale Internet services.

We stand ready to speak with you immediately to follow up on these matters.

Sincerely,

Glenn Britt

 And now Moonves's reply:
 

Dear Glenn:
Dear Glenn:In the interests of getting CBS back on our cable systems today, we write to propose that CBS and Time Warner Cable immediately agree to resume carriage with the new economics TWC reluctantly agreed to during our negotiations, while employing all the other terms and conditions of our recently expired contracts. Although those terms are not ideal to CBS or TWC, and would leave TWC and our customers without the digital rights that CBS has provided to others, since both parties have lived under those terms productively for many years, we believe we should continue to live with them in the interest of restoring CBS immediately for the benefit of consumers.
I was surprised to get your letter yesterday, particularly since I hadn‟t spoken to you in more than a week. Come to think of it, you haven‟t reached out to me personally, as I have to you on more than one occasion, even once during this entire matter, so your communication was both unexpected and welcome. The fact that you released it simultaneously to the media, however, dampened my enthusiasm somewhat. It made me suspect that the document was not, as I hoped, a sincere offer but rather a public relations gesture of some kind. Sadly, my suspicions were more than justified. I was also surprised and disappointed when your incoming CEO, when asked by CNBC whether we had responded to your lengthy letter, said, “I am not aware of CBS having made a counterproposal or responded to our proposal in any way.” I found this rather dishonest. After all, we had received your communication along with the press not five minutes before airtime, as he surely must have known.

Nevertheless, I welcome this opportunity to respond to your “offer,” and to run down some other specious arguments you have made that require clarification and correction.

First, after reviewing your letter, we have concluded that there is not a sincere or helpful proposal in it. It is, rather, a well-wrought distraction. Let me remind you, Glenn, that you have in your possession more than 100 pages of our actual proposal, with economics, terms and rights agreements contained for CBS, Showtime and all the content vehicles under discussion. You had them well before you dropped our programming from your service. We have never received a mark-up or reply to anything contained in them. Last Friday, in spite of the fact that we had offered a one-week extension to remain on the air while we continued our discussions, you chose to take us off the air. Why? Because, as your new CEO stated, Time Warner Cable would “have more leverage” with CBS off the air and our viewers deprived of our programming. Since that night, Friday at 5:00 PM, we have not heard from anybody at Time Warner Cable to discuss anything at all, in spite of your public statements to the contrary. Until, of course, your public letter masquerading as a private one.

That‟s not negotiating. That‟s grandstanding.

As to your groundbreaking “offer” to go a la carte: Anyone familiar with the entertainment business knows that this is an empty gesture. The economics and structure of the cable industry have created a certain way that content is distributed and compensated. We both know that a true a la carte universe is not one that Time Warner Cable welcomes.

In fact, if you thought it was a good idea, why aren‟t you offering your new, multi-billion-dollar Lakers and Dodgers channels to your subscribers in Los Angeles on an a la carte basis? Instead, your subscribers in Los Angeles are already being charged in the neighborhood of $4.00 for the Lakers and likely more than that for the Dodgers – both of which you have pulled off broadcast television entirely. These charges are added to the cost of your customers‟ basic monthly bill whether they want them or not. At the same time, you find it impossible to pay far, far less than that for the network that brings your viewers the NFL, the PGA Championship, the Masters, the NCAA Basketball tournament, SEC Football, plus 60 Minutes, NCIS, The Big Bang Theory, Under the Dome, David Letterman, the Grammys, and so much more.

We view your so-called proposal, then, as nothing more than an attempt to muddy the water and confuse the public discussion.

Are you really so reluctant to come to the same kind of agreement that we have struck – without incident – with every other cable operator, telco and satellite provider? You already pay ten networks on your channel lineup more than you compensate CBS, all of which have far fewer viewers. What we are looking for, have always been looking for, is fair compensation for our content. CBS is the most popular programmer in the world. Showtime has content that is the most sought-after in the business. Why can‟t you see your way clear to honestly paying for what your customers value most?

Perhaps the most egregious portion of your letter was at the very top, where you “agree to resume carriage with the „new economics‟” while “employing all the other terms and conditions of our recently expired contracts.” On the surface of it, that looks reasonable. But it‟s not. Clever PR, perhaps, but not genuine negotiation. As I am sure you know, we have no “new economics” that are not intimately tied to new “terms and conditions.” Those terms and conditions, better known as rights, were established in 2008. That was before the introduction of the iPad. Netflix was still doing little but mailing out DVDs. Amazon was known simply for selling books. This doesn‟t even begin to account for the new entrants now coming up the ramp who are interested in paying a fair price for the most desirable programming. What you are asking for, pure and simple, is either to gain the right to deliver content for free that others are paying for, or to inhibit CBS from licensing content to existing online competitors and new companies that are now emerging. I can understand why you might want to preserve your dominance in that venue, but bullying us into becoming your accomplice in that effort doesn‟t seem fair. Again, what we are seeking with you is nothing more – or less – than a rights and conditions package that every other cable, satellite and telephone company has agreed to.

Rather than engaging in public posturing that achieves nothing but confusion and doesn‟t move us one bit closer to our mutual goal, please return to the negotiating table and talk about the real issues that separate us. We will be there waiting and hopeful.

Sincerely,
Leslie Moonves


NEW YORK--(BUSINESS WIRE)-- Time Warner Cable sent the following letter today to CBS Corporation President & Chief Executive Officer Leslie Moonves:

 

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