But in one area, CBS and Mr. Moonves have led to a shake-up in the broadcast world that could be labeled revolutionary: the issue of compensation for retransmission rights. Before almost anyone else in the business, Mr. Moonves effectively pushed for distributors to pay fees to the broadcast channels just as they do to cable networks.
The result has been a windfall for all the broadcasters and a crucial lifeline as audiences continue to shrink.
“One of the things people misjudged about CBS was the growth potential,” Mr. Moonves said in an interview. “We were considered a low-growth company: how are they going to grow this business? This was one of our keys. We were going to get paid for retransmission, and that’s how we were going to grow.”
The most recent fight — a high-noon showdown between CBS and Time Warner Cable — ended this week the way all recent confrontations between big broadcasters and cable operators have ended, with the cable operator pulling out a checkbook instead of a gun.
The fight was longer — 32 days — and nastier than either side expected. The network had never before seen its stations go dark in a fee dispute. The two sides traded blows in full-page newspaper ads, and Time Warner Cable even offered some subscribers free antennas. (Time Warner Cable executives declined to comment.)
In the final deal, the cable provider will pay CBS a hefty increase in fees for the right to retransmit the signals of its stations in big cities like New York, Los Angeles and Dallas — a reported rise to $2 per subscriber over the next five years, more than double the network’s previous deal with Time Warner Cable.
At the same time, CBS rejected demands that it give up the opportunity to sell separately its content to digital outlets like Amazon and Netflix, insuring another bountiful revenue stream, likely to be worth hundreds of millions a year.
CBS projects that by 2017 it will take in $1 billion annually in retransmission payments. David Bank, an analyst with RBC Capital markets, said that the figure could easily go to $2 billion.
To further underscore the advantage for CBS, the company’s stock price shot up 6 percent in the first two days after the settlement. (The CBS network, along with the company’s television production arm, interactive division and a half-share of the CW network, made up about 55 percent of total revenue.)
“I just knew how valuable our content would be,” said Mr. Moonves, who last year received total compensation of $62.2 million, making him the country’s highest-paid media executive. “People kept saying cable is a better business because they have a dual revenue stream. I felt strongly we should be as well.”
Mr. Moonves credits Chase Carey, the chief operating officer from News Corporation, and the acquisition of NBC by Comcast, the nation’s biggest cable operator, for the move toward big fee increases for broadcasters. But Mr. Banks says that CBS has been the unquestioned leader.
“I do think the other broadcasters have a pretty big debt to pay to Les,” he said.
One longtime rival network executive, who asked not to be named, said, “If anyone was going to break the code on retransmission it was going to be Les and CBS.”
Their success is a culmination of a long campaign, which Mr. Moonves began in 2005. At that point, CBS had no cash compensation from cable operators. Viacom, then CBS’s corporate owner, had decided to split its television assets, sequestering its lucrative cable networks, like MTV and Nickelodeon, from CBS, then considered a low-to-no-growth burden on its stock price.
The plan to demand cash won Mr. Moonves a chorus of derision from cable executives, who had long pledged almost a blood oath never to pay broadcasters cash as compensation for retransmission rights. At one industry gathering, a senior cable executive, whom Mr. Moonves preferred not to name, approached him, angry, shaking his finger at him, telling him he would never get a penny for retransmission rights.
“They resisted it,” Mr. Moonves said. “There were a lot of people saying the same old thing: you’re a network, you should not get paid.”
Article source: http://www.nytimes.com/2013/09/07/business/media/bold-play-by-cbs-fortifies-broadcasters.html?partner=rss&emc=rss