Pay television providers forced Al Jazeera to remove or block its online video content from American viewers in return for launching its new news channel on cable systems this week.

The Qatar-based news network had maintained a loyal, but small online audience for its English language news programming, using video streaming to reach American audiences that could not watch on cable or telco-TV.

For Time Warner Cable and AT&T U-verse customers, neither of which carry the new Al Jazeera America network, the move effectively cuts off viewing of the news channel’s English language programming.

The removal of Al Jazeera video content began with the termination of its live global English language stream within the United States. That was followed by blocking the network’s video clips on YouTube. The only way for viewers to watch the network now is by paying a cable, telephone, or satellite operator, assuming they are willing to carry it.

AT&T U-verse suddenly dropped predecessor Current TV just hours before Al Jazeera America was scheduled to launch in its place. The loss of five million potential viewers came as a complete surprise, culminating in a lawsuit filed against AT&T for violating its contract.

“Unfortunately, AT&T’s decision to unilaterally delete Al Jazeera America presented us with circumstances that were untenable — an affiliate that has willfully and knowingly breached its contractual obligations,” Al Jazeera America wrote in a statement issued Tuesday night. “Al Jazeera America’s strong hope is to resolve this matter quickly.”

AT&T issued its own statement stating the company “could not reach an agreement with Al Jazeera that we believed provided value for our customers and our business.”

Riyaad Minty, Al Jazeera’s head of social media has fielded complaints from loyal viewers who never got to watch the channel through their pay television provider and now can’t access the network without one. Minty tweeted the network was considering a new online offering within weeks, but it would not include Al Jazeera America.

The news channel is forced to tread carefully because of restrictive terms in its carriage agreements, designed to cut off cord cutters who refuse to pay for cable television. Most cable contracts forbid allowing cable networks to stream their programming online unless they offer it only to those who can prove they already pay an authorized provider.

Time Warner Cable is reportedly still negotiating with the news channel, which usually asks for less than five cents a month per subscriber. But no decision had been reached. Time Warner dropped predecessor network Current TV hours after news stories reported Al Gore, Jr. and other owners had sold the channel to the Qatar news organization.

Sony’s bid to enter the “over-the-top” online video business has gotten a shot in the arm with news it has reached a preliminary agreement with Viacom, Inc., to carry its popular cable networks on the Japanese electronics giant’s planned online subscription TV service.

Sony wants to build its own virtual cable television service, offering live and on-demand programming delivered over broadband lines in direct competition with cable and phone companies Comcast, Time Warner Cable, AT&T and Verizon.

Getting agreements with traditional must-have cable networks like Comedy Central, ESPN, and USA have been difficult because the networks fear alienating their traditional customers — large cable, telco and satellite TV companies.

The Wall Street Journal reports Viacom’s agreement remains preliminary at the moment and the final details have yet to be worked out. If a final agreement is reached, it will be a breakthrough for so-called online cable systems which have gotten nowhere with other cable network owners, including Comcast-NBC, Walt Disney, Time Warner, and CBS.

Cable executives have repeatedly warned that a wider distribution of cable network programming would make them more reluctant to pay higher prices for the cable networks because of the loss of relative exclusivity. Many cable programming contracts restrict the ability of network owners to sell to would-be online competitors.

Viacom has had contentious relationships with cable and satellite companies in the past, so observers suggest it is no surprise Viacom would be among the first to break with tradition. Viacom’s CEO, Sumner Redstone, also controls CBS which is currently off Time Warner Cable systems in three major cities and has had its pay movie channels Showtime and The Movie Channel blacked out on Time Warner systems nationwide. If Sony’s service gets off the ground, CBS could ask Time Warner customers to sign up with Sony instead to get those networks back.

Cord Cutting is Real (Graphics: The Wall Street Journal)

Competing online video services from Intel and Google have largely gone nowhere because of stalled programming negotiations. How Sony managed a breakthrough remains a mystery. To secure rights, Sony may have been asked to sign a lengthy contract with favorable financial terms for Viacom, or Sony might have agreed to carry the full roster of Viacom-owned cable networks, which include:

The next generation of the Sony PlayStation may be your next cable box.

• BET
• CMT
• Comedy Central
• Logo
• MTV
• MTV2
• Nick at Nite
• Nick Jr.
• Nickelodeon
• Nicktoons
• Palladia
• Spike
• TeenNick
• Tr3s
• TV Land
• VH1

A source told the Journal Sony hopes to launch its new venture by the end of the year, perhaps on the next generation of Sony’s PlayStation gaming console due soon. Sony also could offer the service on its line of Bravia high-definition televisions, as well as tablets and smartphones.

The Journal:

People who have seen demonstrations of Sony’s system say it has some features that are appealing in comparison to traditional pay TV distributors, including one that recommends shows for users based on what they’ve previously watched. Content providers are allowed to supply some of those recommendations, so they can steer users to other episodes on their channels, according to the people familiar with the matter. Sony provides other content suggestions for viewers based on an algorithm.

The development of online cable television in direct competition with large cable and phone companies could spark a new wave of broadband usage restrictions including usage caps and metered billing. The same telecom companies that earn a substantial part of their revenue selling cable television service are likely to find it unsettling to discover Sony undercutting them on price and using “their” broadband lines to do it. Placing restrictions on the amount of broadband traffic a customer can use each month would deliver a significant deterrent to would-be cord cutters.

If Time Warner Cable is concerned about the rising cost of cable television, it sure didn’t show it after sources revealed the cable company quickly accepted CBS’ demands for more compensation but is refusing to budge until it wins rights to show CBS programming on mobile platforms.

Sources tell the Daily News Time Warner quickly agreed to a major increase from 50 cents a month per subscriber to $2 a month for CBS content, but is keeping CBS-owned stations and cable networks off the dial until the network agrees to let the cable company distribute on-demand and live programming on cell phones, tablets, and personal computers.

Earlier this week, Time Warner Cable CEO Glenn Britt made an offer CBS couldn’t wait to refuse: the cable company would put CBS programming back on the lineup if it could be sold to customers a-la-carte instead of bundling it with other channels.

That would “allow customers to decide for themselves how much value they ascribe to CBS programming,” Britt said in a letter to CBS CEO Leslie Moonves that was promptly posted online.

CBS called the idea a sham, noting a-la-carte runs contrary to the economic model the cable industry itself regularly and loudly defends. Try telling ESPN, which costs every cable subscriber more than $5 a month, it will now be offered only to customers that want to pay for it.

Phillip “Capitulation Corner” Dampier

In fact, for most cable operators, the concept of selling customers only the channels they want is the nightmare scenario. Average revenue per subscriber would tumble as consumers rid themselves of networks with three digit channel numbers they didn’t even know they had. Goodbye ‘Yarn Creations’ on Generic Home Shopping Channel 694, Bosnian music videos, reruns of Simon and Simon, mysterious networks showing episodes of Law & Order that USA Network already burned into your permanent memory, and that “fine arts” network that shows endless hours of Antiques Roadshow dating back to 1998.

Digital rights is an important issue for both cable companies and programmers. Although both sides deny “cord cutting” is real, the intensity of the fight allowing online viewing says otherwise. If CBS gives away rights to Time Warner Cable to show live and on-demand programming to subscribers, CBS can’t make as much money offering shows on its own website (with its own ads), much less sell programming to customers. Time Warner fears if CBS only offers online programming through its own website, customers might decide they don’t need the cable company to watch those shows any longer.

“At the moment the cable operators have the leverage because the more that CBS is off the cable, the more that they realize the viewers don’t need it,” said media expert Michael Wolf, former Yahoo! board member and president of Viacom-owned MTV Networks.

For now, many viewers are turning to pirate video sites to catch the CBS shows they are missing. TorrentFreak reports huge spikes in illicit download traffic of CBS content over the weekend. Under the Dome was the source of much of the spike, although customers are also downloading pirated copies of Showtime programming. The evidence is clear: take away popular programming and customers will simply download it illegally from third-party websites.

As summer wanes and the fall football season approaches, just about everyone expects the war will quickly end, because football fans are more than willing to drop a provider if they can’t spend several hours in front of the television Sunday afternoon. Considering Time Warner has reportedly already caved in on CBS’ money demands, it is likely CBS will be able to eventually extract even more money from the cable company to secure digital distribution rights. Subscribers will pick up the tab for both during the next round of rate increases beginning this fall in the south and by January in the northeast.

Time Warner Cable’s latest regulatory notice admits current deals with more than 50 networks are due to expire soon, and the company may cease the carriage of one or more of the networks. They include: Lifetime, E!, Style, Turner Classic Movies, and the NHL Network. So just like Law & Order reruns, we will see this episode again in the near future.

The PGA is offering a way for golf fans to watch some of the PGA Championship online, bypassing the CBS-TWC dispute.

[flv]http://www.phillipdampier.com/video/CNBC PGA Time Warner 8-8-13.mp4[/flv]

Perhaps the biggest loss viewers without CBS will experience this weekend is the PGA Championship. CNBC talks with tournament officials in Rochester, N.Y., about the possibility of viewing alternatives. But golf fans can watch parts of the tournament for free from the PGA’s website. (3 minutes)

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Bloomberg News reports that while many cable viewers could care less about the loss of CBS and Showtime, broadband customers may care very much when cable operators start charging extra for Netflix or add punitive usage caps to make sure customers don’t cut cable TV’s cord. (3 minutes)

CBS has blocked Time Warner Cable and Bright House Networks’ broadband customers from watching CBS online video in a retaliatory move against Time Warner Cable’s decision to pull CBS-owned programming off the lineup because of a contract dispute.

Broadband customers of both cable companies (Bright House relies on Time Warner Cable to negotiate its programming carriage agreements) started losing access to CBS streamed content late Friday, now replaced with a message blaming Time Warner Cable for the loss. Earthlink customers using either cable operator are collateral damage — Earthlink is effectively reselling the others’ cable broadband services.

“If Time Warner Cable is a customer’s Internet Service Provider, then their access to CBS full episode content via online and mobile platforms has been suspended as a result of Time Warner Cable’s decision to drop CBS and Showtime,” said a CBS spokesperson. “As soon as CBS is restored on cable systems in affected markets, that content will be accessible again.”

In place of the programming, cable customers get to see a brief attack ad criticizing Time Warner for yanking CBS-owned channels and networks, despite the fact CBS authorized the companies to keep the channels up and running until the dispute can be worked out.

Time Warner Cable shot back with their own rebuttal.

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Time Warner Cable claims it does not want a war over programming costs in its latest ad regarding the blackout of CBS programming, which now also affects the cable company’s broadband customers. (1 minute)

“CBS has shown utter lack of regard for consumers by blocking Time Warner Cable’s customers, including our high-speed data only customers, from accessing their shows on their free website,” the company said in a statement. “CBS enjoys the privilege of using public owned airwaves to deliver their programming – they should not be allowed to abuse that privilege.”

Customers well outside New York, Dallas, and Los Angeles discovered several CBS-owned cable channels were missing, even though they are not served by a CBS-owned local affiliate. The most obvious — Showtime/The Movie Channel came during the middle of the latest season of Dexter.

New York City residents can sat least keep watching WCBS by signing up for Aereo, which streams local stations over the Internet. A 30-day free trial is available. Getting programming in other cities is going to be much tougher. Some predict hardcore viewers will just look for pirated copies of their favorite shows.

CBS said no further negotiation took place over the weekend. Some industry analysts predict the impasse could run for weeks, even potentially until the start of football season — considered a line of PR destruction neither company is willing to cross.

Golf is not as critical, apparently. The PGA Championship taking place in Rochester, N.Y., this weekend is likely going to get a smaller viewing audience because of the blocked programming.

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The blackout of CBS programming by Time Warner Cable enters its third day with no light at the end of the tunnel, suggests this Bloomberg News report. (3 minutes)

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This is not the first time broadcasters and cable operators have cut viewers off, sometimes for more than a week. Bloomberg News reports the soft deadline for Time Warner and CBS to sort out their differences is the start of the fall football season. Sources say Time Warner now pays $1 a month for CBS, but the network now wants $2 a month. (3 minutes)

After repeated extensions, Time Warner Cable yanked several channels from your cable dial today, and before you ask, you are -not- entitled to any refunds. So don’t ask. (Actually, ask anyway.)

The affected channels are:

• CBS Owned-and-Operated TV stations in the following cities:
  Los Angeles:  KCBS and KCAL-Ind.
  New York:  WCBS
  Dallas-Ft. Worth:  KTVT-CBS and KTXA-Ind.
  Boston:  WBZ-CBS and WSBK-Ind. (carried in parts of NH and MA)
  Chicago:  WBBM-CBS (carried in parts of WI)
  Denver:  KCNC-CBS (carried in Gunnison and Telluride)
  Detroit:  WKBD-CW (carried in parts of OH)
  Pittsburgh:  KDKA-CBS and WPCW-CW (carried in parts of OH)
• Showtime
• The Movie Channel (TMC)
• Flix
• Smithsonian Channel

Phillip “FAQ” Dampier

If your local CBS station is not on this list, you will still be able to watch CBS programming because the dispute only affects local stations directly owned/operated by CBS. But cable subscribers nationwide may notice the loss of the cable networks and premium movie channels, if one subscribes.

As a courtesy, Time Warner Cable has elected to throw Showtime subscribers a bone (and avoid having to pay any refunds) by turning on Starz and Encore for affected customers. (If you happen to find anything worthwhile to watch on Starz, please post a comment and let the rest of us know what we are missing.) Encore is a better choice, but customers should feel free to arrange their own “credit” by canceling Showtime until the dispute is resolved. Time Warner Cable was running a promotion offering HBO and Cinemax for $5 a month each for six months to a year. Inquire if that option is still available if you are feeling premium movie channel withdrawal.

“We deeply regret being forced into this position by CBS, but we’re prepared to stand by our customers and do what it takes to fight these unreasonable demands,” writes Time Warner Cable.

In the meantime, we’ve helped massage Time Warner’s FAQ and rubbed in some truth extract:

Q:  Dear Time Warner Cable Assassins of Joy: Now that you’ve stopped carrying the channels I am still paying for, where can I find the darn shows I’m missing?

A:   There are any number of places, including free over-the-air using an antenna, if you remember what that looks like, plus some places online for free.  In addition, in NYC only, CBS is available through Aereo, which is currently offering a one-month-free-trial at www.aereo.com. Just don’t think about dropping your entire cable television package once you discover Aereo works well enough for you and you don’t need us to delete $70 a month from your wallet and recreate it in ours. Pretty please.

Courtesy: Rich Greenfield, BTIG

For national network prime time shows:

• Visit www.CBS.com to see recent airings (mostly repeats except for Stephen King’s ‘Small Town Under Glass’) of their primetime shows. Thank us we are not capping your Internet usage, sticking it to you for watching unauthorized shows (the ones we don’t own) for free.
• In addition, many primetime programs are available via national online services like Amazon.com, Hulu.com, iTunes.com, or Netflix.com, some for free, some as part of a subscription fee that is almost always far less than the pillaging prices we charge.

For daytime soap operas if you still bother to watch those:  www.cbs.com for free

For local news, weather, and sports:  Remember that your other local broadcast stations remain available on the Time Warner Cable lineup, along with NY1/YNN in select markets (because you want to get your local news from a wholly owned Time Warner Cable news network — the one that often shills our own products). And some of the local CBS stations stream their local newscasts for free over the Internet. Again, worship us for not capping your broadband. Check your local station’s website for information.

For syndicated shows like Dr. Oz, Ellen, Katie, and others:  They are probably all repeats anyway and how many times do you need to be told you are living your life all wrong. It’s summer. Go outside. Be happy. If you insist, most of those shows share either full episodes or highlights via their own websites, for free.

For shows that appear on Showtime, or movies:  Showtime makes some episodes and clips available for free at Sho.com and at Hulu.com. Because nothing equals the experience of watching an entire show like a 30 second clip! Other episodes can be found at paid services like Amazon.com, Netflix.com, and on iTunes. So while you are still paying us for those premium movie channels, go and pay someone else too. And remember that, as a courtesy so we don’t actually have to refund your money, we are providing replacement programming from Starz and Encore on a temporary basis.  Showtime and TMC customers should look in your onscreen guide for the Starz and Encore channel numbers.

For shows on Smithsonian:  If you can find the channel on our 1,000 channel lineup, you are better than us. If you actually watched any shows on Smithsonian, you can get by with similar shows on Discovery, National Geographic, TLC, Animal Planet, and many others, as long as you steer well clear of Honey Boo Boo. She’s a national treasure too, we know, but not enough to be on the Smithsonian Channel.

Frequently Asked Questions Not Well-Answered

Q. Why is this happening?

A:  $$$. We collect, count and stack your money for the pleasure of our executives and shareholders and now other programmers dare to want some of it. We’re not going to let that happen unless you give us more than enough to replace what we’re giving them.

Q:  This kind of blackout seems to happen to Time Warner Cable all the time; Screw you, I’m going to switch to another provider.

A:   Screw you right back. Unfortunately, these kinds of blackouts have occurred more often over the past few years—last year, over 80 broadcast TV stations withheld their channels from all kinds of video providers, including cable, satellite, and telephone companies because they smell the cash we currently get to play patty-cake with.  It’s not just Time Warner Cable, silly—every provider is at risk for losing the right to carry these channels that are available for free over the air to an antenna. Because when this kind of money is involved, all sorts of hell breaks loose. Switching to another provider won’t prevent similar blackouts from happening to you in the future, and you could miss some of your favorite programming, like…  NY1 in New York City. (Really.) We’ve been raising your rates and making you pay for hundreds of channels you never watch for years. Remember, sometimes the evil you know is better than the evil you don’t. We’re talking to you AT&T U-verse.

Q:  It seems odd that CBS SportsNet is still available, when the main CBS channel isn’t.  Why is that?

A:  Wait.

Q:  I live in Los Angeles; with KCAL not available, how do I see the Dodgers games?

A:  Get your lazy butt in the car, go to the stadium and buy tickets.

Q:  I’m an NFL fan, and I’m going to miss my team’s pre-season games.  Where else can I see them?

A:   See above.