02 August 2010

CBS, Comcast Sign 10-Year Contract to Carry TV Shows


CBS Corp., owner of the most-watched U.S. broadcast network, signed a 10-year agreement allowing Comcast Corp. to carry programming from its television stations.

The so-called retransmission consent deal expires in 2020, New York-based CBS said today in a statement. The contract also provides Comcast customers with Showtime Networks, the new Smithsonian channel, expanded distribution of CBS College Sports and more on-demand access to CBS and Showtime online and on TV.

CBS Chief Executive Officer Leslie Moonves, the first broadcast network owner to seek retransmission fees to add to advertising revenue, said the deal boosts the future prospects for such fees and gives long-term stability for the Showtime pay-TV channel. CBS and Comcast’s agreement offers flexibility for making money from shows and movies across new media, including putting programs online for paying cable customers.

“There’s a great deal of flexibility because God knows the world’s going to look very different in 3 years, no less 10 years,” Moonves said in an interview. “There are benchmarks in some of the new-media terms that depend on how the world is going at that point.”

CBS and Philadelphia-based Comcast, the largest U.S. cable company, were able to strike a deal without the disruption in TV service that came during other similar talks this year. The negotiations were wrapped up a year and a half before the expiration of CBS’s prior contract with Comcast, and Showtime’s agreement was up “shortly,” Moonves said.

Good-Faith Talks

Comcast last month pledged to U.S. regulators that it would negotiate in good faith with TV-station owners after its planned takeover of General Electric Co.’s NBC Universal.

“We’re in a marketplace where Comcast is going to be our rival as the owner of NBC, but as a cable carrier there was totally good faith in their negotiations,” Moonves said. “They lived up to their word.”

CBS will likely receive 50 cents a month per subscriber from Comcast starting in 2012, making the contract worth about $75 million that year, estimates Anthony DiClemente, an analyst with Barclays Capital in New York. The fee will steadily rise to more than $1 per subscriber by 2020, he said in a report.

“It’s helpful that it’s a longer term deal because it adds to the predictability of the retransmission consent revenue stream,” DiClemente, who recommends holding the shares, said in an interview. “CBS was able to negotiate pretty healthy escalators in the contract.”

Annual Target

Financial terms weren’t disclosed. CBS has said it’s aiming for $250 million a year in total retransmission fees by 2012, a goal CBS Chief Financial Officer Joseph Ianniello called “conservative” on a February conference call.

“It’s certainly in line with that goal, and that’s all I’m going to say,” Moonves said.

The $250 million goal is calculated based on monthly fees of about 50 cents per subscriber, Ianniello explained at a June analyst conference.

CBS rose 52 cents, or 3.5 percent, to $15.30 at 4:02 p.m. in New York Stock Exchange composite trading. The shares have gained 8.9 percent this year. Comcast climbed 1 cent to $19.48 in Nasdaq Stock Market trading.

CBS plans to report second-quarter earnings after U.S. markets close tomorrow.

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