Blackout ends: CBS channels restored to AT&T outlets, including DirecTV

The nearly three-week blackout of CBS stations on AT&T television services, including DirecTV and U-Verse, ended Thursday after the two television powerhouses reached a new carriage agreement.

An estimated 6.6 million AT&T customer homes nationwide were included in the CBS station blackout, including 1.4 million in the Los Angeles region. Viewers missed “The Late Show With Stephen Colbert,” “Judge Judy,” “The Young and the Restless” and Norah O’Donnell’s first weeks as the new host of “CBS Evening News.”

“CBS and AT&T regret any inconvenience to their customers and viewers and thank them for their patience,” the two companies said in a joint statement.

AT&T customers in New York, Chicago, Atlanta, Denver, Sacramento and San Francisco also were affected by the blackout. The new AT&T-CBS agreement includes coverage of the CBS-owned Smithsonian Channel and the CBS Sports Network.

Blackouts have become more common in recent years because of increasingly contentious negotiations over fees that programmers charge for their content. Media companies are paying more for programming such as sports while pay-TV operators face their own financial pressures as more consumers cut the cable cord in favor of lower-cost alternatives.

According to the American Television Alliance, there have been a record 230 outages on various pay-TV systems this year.

AT&T remains at loggerheads with Nexstar Media Group, one of the nation’s largest TV station owners. And, in late July, Dish Network dropped 22 Fox-branded regional sports networks, including Fox Sports West, which broadcasts Angels games, and Fox Sports San Diego, which carries Padres games. That dispute over carriage fees also remains unresolved.

Terms of the new multiyear deal between CBS and AT&T that replaced the one that expired July 19 were not disclosed. The dispute had centered on the retransmission fees that AT&T must pay CBS for the right to broadcast the signals of 26 CBS-owned stations, including KCBS-TV Channel 2 and KCAL-TV Channel 9 in Los Angeles.

During an earnings call with analysts, CBS acting Chief Executive Joe Ianniello hinted that CBS had wrangled a rate hike in its new agreement with AT&T.

“We are very pleased to have achieved an agreement that recognized what CBS brings to the table,” Ianniello said. “We have now successfully completed three very significant carriage deals — AT&T, Altice and Nexstar — in the span of less than two weeks.”

Ianniello noted that the broadcasting company should hit its target of generating $2.5 billion in annual revenue from retransmission and affiliate station fees by next year.

A breakthrough in the carriage fee talks came as CBS is separately negotiating to acquire its corporate sibling Viacom Inc., owner of MTV, Nickelodeon, BET and the Paramount Pictures movie studio. Wall Street has been expecting a deal to emerge this summer. The two companies, both controlled by the Sumner Redstone family, were part of the same conglomerate until 2006, when Redstone divided his holdings with the belief that CBS and Viacom were strong enough to stand on their own.

But the television industry has changed dramatically in the last five years. Larger media companies, including AT&T and Walt Disney Co., have been gobbling up assets to fortify themselves to compete against Netflix and Amazon.com. Now, Viacom and CBS are among the smallest of the major media companies.

CBS on Thursday reported a 10% jump in earnings in the second quarter — $440 million, or $1.17 a share, compared with $400 million, or $1.05, in the year-earlier period. Revenue also increased 10% to $3.8 billion in the quarter. Analysts were expecting earnings of $1.12 a share, according to FactSet.

Advertising revenue grew 7%, led by CBS’ broadcast of the NCAA basketball tournament and championship game.

Earlier in the day, Viacom disclosed better than expected third fiscal quarter results.
The New York media company reported earnings of $544 million, or $1.35 a share, compared with $522 million, or $1.29 a share, in the year-earlier period. Revenue reached $3.4 billion in the quarter, up from $3.2 billion in the same period a year ago.

Viacom notched 6% growth in advertising sales — the first such increase in five years. The company also benefited from its purchase of streaming service Pluto TV.

The storied Paramount Pictures on Melrose Avenue posted $85 million in adjusted operating income, nearly double the level from a year ago. The studio released the Elton John biopic “Rocketman” and “Pet Sematary” in the quarter.