CBS May Seek Signal Fee

Faced with an exodus of viewers to cable and the possibility of eroding advertising revenue, CBS Television is seeking a new cash fee from cable operators that run its programming.

Leslie Moonves, who oversees CBS as co-president of its parent company, Viacom Inc., said during an earnings announcement Tuesday that there was “a possibility” that CBS-owned stations could begin charging cable and satellite operators in exchange for the right to air the CBS signal.

“In the next three to five years, it could be worth tens of millions of dollars to the CBS network,” he said. He declined to elaborate.

Currently, the broadcast networks do not collect cash fees from the pay-TV operators that make their signals available to subscribers. But Moonves’ comments, although vague, indicated he might be willing to lead the charge to secure a second revenue stream for broadcasters that now rely on advertising.

On Tuesday, others in the industry praised Moonves for daring to publicly take on a topic that has long divided broadcasters and pay-TV operators.

“It’s the most important issue facing the industry today,” said Jeffrey Smulyan, chief executive of Emmis Broadcasting, a station owner. “It’s really critical that a company the size of Viacom gets behind this.”

Moonves’ comments came as Viacom is considering splitting into two publicly traded companies. Under a plan proposed last month, Viacom co-President Tom Freston would oversee Viacom’s fastest-growing properties, including MTV, Nickelodeon and Paramount Pictures.

Moonves would run the slower-growing assets, including CBS, Infinity Radio and outdoor advertising. New cash fees from pay-TV providers could appeal to this company’s investors.

Cable operators have vowed to fight any attempt to levy new fees. They warn that Moonves’ idea could cost consumers money. By law, cable operators can pass programming costs along to consumers.

“The government gave these stations free licenses,” said Fred Dressler, programming chief of Time Warner Cable, the nation’s second-largest cable provider. “Why should cable customers pay for something they can get for free?”

Moonves acknowledged Tuesday that existing contracts with several cable operators would prevent CBS from charging fees anytime soon.

How broadcasters should be compensated for supplying some of cable’s most popular programming has been a sore spot since 1992, when Congress passed a law to help broadcasters stay competitive with cable.

Under the law, stations could choose “must carry” status, which required distributors to carry them, or “retransmission consent,” enabling stations to withhold their signal if they were not compensated.

The largest stations chose retransmission consent, but none got paid in cash. Instead, cable operators struck deals to carry the cable channels owned by ABC, NBC and Fox in exchange for the right to air broadcast channels for free.

CBS, which had held out for cash, got nothing for its signal because it had no cable channels. The networks have since used this arrangement to launch cable channels and to charge higher rates for existing ones.

On Tuesday, cable channels drove Viacom to better-than-expected first-quarter results, compensating for the poor performance of radio and TV stations. Higher programming and promotional expenses at Infinity resulted in a 5% decline in operating earnings. TV revenue and operating earnings dropped 5% and 8%, respectively.