Retrans fee battles? You ain't seen nothing yet

Jim O'NeillInvestor conferences always seem to bring out the best in media execs, and yesterday's outing in the tony environs of Palm Beach, Fla., where, Deutsche Bank Securities opened its Media & Telecom conference, didn't fail to produce. Pay-TV execs talked at length about subscriber losses, TV Everywhere, Netflix (NASDAQ:NFLX), retransmission fees and more.

Time Warner Cable CEO Glenn Britt, in what had to be the understatement of the gathering, said it's "not acceptable to me to continue to slowly lose video customers every year. That has been going on for too long." Unfortunately, his vow to renew efforts to hold onto subscribers came with little meat aside from a promise to "put renewed energy" into the effort on the product and marketing side. He blamed the usual suspect-the housing market-for the MSOs continued losses. And, he said TWC had hired "pricing experts" to help it with strategy. "We are approaching pricing very differently than the old model," Britt said. "We're offering a large set of different products, services and packages and offerings in different geographies. We're not treating people like one-size-fits-all." Of course, he wouldn't say prices would stop rising, one of the biggest complaints of pay-TV subscribers.

Comcast (NASDAQ:CMCSA) CEO Neil Smit, meanwhile, showed a little more passion. "I hate losing subs," he said, calling video "the battleground and the area where we see the most opportunity for innovation."

Smit also said the MSO is looking for more flexibility in its carriage agreements, given that programming costs will continue to rise.

"It is an issue for everyone in the industry," Smit said. "We haven't had an issue where we had a retrans battle that has resulted in a stalemate where the consumers have to face the impact."

That could change in coming years, especially with the remarks of CBS boss Les Moonves in mind.

Moonves wouldn't talk about what everybody really wanted to know-who's going to replace Charlie Sheen on Two and a Half Men, but he did say that the network expected to make $2.5 billion-that's right, billion-in retransmission fees in the near future; that's more than a smideg above the $250 million it currently makes.

Moonves said the network was "vastly undervalued," adding that distributors paid fees for "the big ticket items," like CSI, NCIS and Two and a Half Men. He said the four networks see about 40 percent of the total TV audience, and distributors pay about $26 billion a year in programming fees, meaning CBS, NBC, ABC and FOX should have a pot of some $10 billion to split.

That math is sure to cause some sleepless nights for pay-TV operators looking down the road at retransmission fee battles that will make the scattered fights this year look like arguments over lunch money.

Moonves, by the way, also discussed his recent deals with Netflix, a company he has said is viewed n the industry as both the anti-Christ and the Second Coming. CBS, he said, sees a deal with Netflix to stream older shows as an opportunity to make a little extra cash from content that's in risk of going stale on the shelves (no current show is part of the deal it signed last month.)

"It doesn't affect our food chain," he said. "We are not going to risk billions for tens of millions."

Of course, no conference would be complete without Time Warner (NYSE:TWX) Chairman and CEO Jeff Bewkes taking shots at Netflix and evangelizing TV Everywhere.

Bewkes said fees from Netflix and Amazon (Nasdaq:AMZN)--which charge $8 and $6.50 respectively for unlimited streaming--"does [sic] not pay to support" Hollywood's content machine. "If you are selling movies for $14 a DVD and renting them for $3 or $4 a night, you don't do the same thing for a buck a night, or all you can eat in the same window," he said. "You move that window back. I think that is the place for subscription VOD."

Bewkes, meanwhile, said the concept of TV Everywhere has been well received by the pay-TV industry, although he didn't address the issues of carriage and retransmission rights.-Jim