Millions of DirecTV subscribers lost access to CBS programming late Friday after talks over a new distribution deal collapsed.
CBS Corp. and AT&T Inc., which owns DirecTV, failed to reach an agreement by an 11 p.m. Pacific deadline. Without a contract in place, AT&T no longer had authorization to include CBS station signals in its television packages in more than a dozen cities, including Los Angeles, New York, Chicago, San Francisco and Sacramento.
CBS owns two stations in Southern California, KCBS-TV Channel 2 and KCAL-TV Channel 9, and both were included in the blackout. The outage extends to CBS’ Smithsonian Channel, CBS Sports and four television stations owned by CBS that carry CW programming.
It was not immediately clear how long the standoff would last.
“After months of negotiations, CBS is simply looking to receive fair value for its popular programming,” CBS said in a statement shortly after its programming was removed from AT&T’s television services. “The DirecTV deal expiring tonight was signed in 2012 and is nowhere close to today’s fair market terms for CBS content.”
CBS has been demanding higher retransmission fees from pay-TV distributors. The move comes as AT&T and other cable and satellite TV companies struggle to hold the line on programming costs because they fear losing even more subscribers to lower- cost streaming services such as Hulu and Netflix.
“The problem is that broadcasters, like CBS, demand more money for shows that their viewers — our subscribers — are watching less,” AT&T said Friday in a letter sent to members of Congress, warning of a possible blackout. “Our customers are fed up with these tactics. They are tired of the endless cycle of price increases and blackouts.”
AT&T is the nation’s largest pay-TV distributor with nearly 24 million customer homes, including an estimated 1 million in the Los Angeles area.
But the Dallas- based telecommunications giant has been under increasing pressure to control costs as it grapples with subscriber defections. AT&T has lost about 1 million DirecTV subscribers in the last year, and so the company has been balking at CBS’ demands.
The outage means that AT&T subscribers in major markets (where CBS owns the local station) no longer have easy access to “The Late Show with Stephen Colbert,” “CBS Sunday Morning” and “60 Minutes.” In various regions of the country, all three of AT&T’s television offerings — satellite service DirecTV, fiber-based U-Verse and the streaming platform, DirecTV Now — are now without CBS programming.
“CBS has put our customers into the middle of its negotiations by pulling its local CBS stations in 14 cities,” AT&T said in a statement. “We had hoped to avoid any unnecessary interruption to any CBS-owned stations or national channels that some of our customers care about. But CBS refused.”
DirecTV Now subscribers in more than 100 markets also lost access to CBS, the broadcasting company said.
CBS blamed AT&T for the impasse.
“AT&T’s willingness to deprive its customers of valuable content has become routine over the last few weeks and months, and recent negotiations have regularly resulted in carriage disputes, blackouts and popular channels being removed from their service,” CBS said in a statement.
CBS last negotiated a retransmission agreement with DirecTV in 2012 — three years before AT&T acquired the El Segundo satellite TV company. The television landscape has changed dramatically since, and CBS appears to be looking to make big gains in this round of negotiations.
However, its efforts come at a time when AT&T is already feeling the pinch. Last year, AT&T purchased programming company Time Warner Inc., which was the parent of CNN, HBO, Cartoon Network, TBS and the Warner Bros. film and television studio. AT&T took on enormous debt to finance that acquisition, as well as the DirecTV purchase in 2015. Investors have been encouraging AT&T to find ways to reduce costs and pay down its debt.
But CBS has financial imperatives too. The New York broadcasting company has been trying to increase its retransmission fee revenue so that it is less reliant on advertising. TV ratings have been declining but programming costs are on the rise. CBS is also preparing to head into crucial contract negotiations with the NFL. Analysts say CBS and other broadcasters probably will have to fork over hundreds of millions of dollars more annually to retain their NFL game packages.
CBS uses retransmission fee revenue to help cover the high cost of football.
This is the second time this month that AT&T has lost programming of a major television station group. In early July, AT&T was forced to drop carriage of 120 Nexstar TV stations when AT&T refused to agree to Nexstar’s demands. Nexstar, which is based in Irving, Texas, currently serves such communities as San Francisco, Fresno, Bakersfield, Colorado Springs and Wichita, Kansas.
Some members of Congress have called on Nexstar and AT&T to end that dispute.
To prepare for the blackout, AT&T has been steering consumers to its Locast app, which enables viewers to stream programming from their ABC, CBS and other broadcast stations via the Internet. AT&T also is suggesting that its subscribers pay for the CBS All Access streaming service, at $5.99 a month. In addition, consumers can install digital antennas to receive the signals of broadcast stations, including CBS. The use of such devices has been on the upswing.
“While we continue to negotiate in good faith and hope that AT&T agrees to fair terms soon, the loss of CBS programming could last a long time,” CBS said.