To almost no one's surprise, the carriage dispute between CBS (NYSE: CBS) and Time Warner Cable (NYSE: TWC) ended over the holiday weekend. The resolution came days before the NFL season was scheduled to begin. The football season had served as the unofficial deal deadline ever since CBS pulled its TV station and cable network signals as well as access to its online video properties from Time Warner Cable.
What CBS, which also owns Showtime, could and couldn't do with its TV shows online was reportedly one of the sticking points in the negotiations. The Wall Street Journal reported (sub. req.) last month that the last contract between CBS and Time Warner Cable had granted the cable operator broad rights to CBS's programs--essentially giving it the same rights for free that CBS sold at a premium to new online distributors.
The terms of the new deal weren't disclosed, but CBS CEO Leslie Moonves hinted that it is not so generous. The agreement gives CBS "the ability to monetize our content going forward on all the new, developing platforms that are right now transforming the way people watch television," Moonves wrote in a memo to CBS employees.
The list of new distributors that might be trying to license CBS programming is long. There are established distributors like Amazon (Nasdaq: AMZN), Netflix (Nasdaq: NFLX) and Hulu--which just added the full run of episodes of "The Good Wife" to its catalog. There are also those companies like Sony, Apple (Nasdaq: AAPL) and Intel (Nasdaq: INTC) that are said to be building new TV services.
It feels safe to say that every major retailer, device manufacturer and online services provider has probably discussed the possibility of licensing some streaming or downloading rights from CBS. Seemingly every quarter, Moonves or one of his peers implies to investors that they would be surprised and excited to learn about the company's latest meetings on this front. In this sense, it was smart for CBS to make sure it isn't giving away any of those rights for free.
But it's also easy to overstate the importance online video and digital distribution played in this blackout, which lasted more than a month. According to the Los Angeles Times and others, CBS was able to double the monthly fee it receives from Time Warner Cable from $1 per subscriber to more than $2.
This was at the heart of the dispute. The fees broadcasters like CBS collect from pay-TV distributors today eclipse the amount of money they receive from online partners and are critical to those companies' bottom lines and stock prices. CBS shares gained more than 4 percent Tuesday, adding back nearly all the value it lost during the month-long dispute.
The CBS deal indicates that the broadcaster is open for business when it comes to dealing with new online distributors, and that is good news for those companies that wish to license CBS programming. One day, online video revenue--depending on how you define it--may easily overshadow the the revenue CBS and companies like it collect from traditional distribution methods. After all, video distribution is moving toward IP. It's just not there yet. --Josh | +Josh Wein | @JoshWein