Several million Time Warner Cable and Bright House customers in New York, California, Texas and Florida will lose CBS programming this Wednesday at 5pm if the three companies do not iron out their differences in contract renewal negotiations.

CBS and Time Warner Cable have taken their fight public over retransmission consent talks that have left the two sides far apart. The cable operators say CBS has gotten greedy asking for as much as 600 percent more than what the cable companies paid under the old agreement that expired in June. CBS says the fact its stations have never been thrown off cable systems before is proof that their terms are reasonable.

Cable analysts say CBS’ old agreement cost the two cable operators between 75 cents and one dollar a month per subscriber. Most believe CBS is now asking for between $1-2 a month per subscriber to renew the agreement.

CBS wants to be paid at levels comparable to the most popular cable networks and believes the fact the network is now number one in the ratings delivers negotiating power. CBS has not made its aggressive position on carriage fees a secret. Executives have told investors it plans to quadruple cable and satellite fees over the next four years with a goal to raise an extra $1 billion. Wall Street analysts have recommended the stock to investors and its value has risen at least 65% in the past year.

But Time Warner Cable spokeswoman Maureen Huff believes CBS is asking for too much.

“Broadcasters have already hit customers with 84 broadcaster blackouts in the past 18 months,” Huff said in a statement. “Les Moonves, president and CEO of CBS, has always been outspoken about the programming fees he believes he deserves. He has said ‘the sky is the limit’ when talking about the price he thinks he deserves for his CBS stations, and he clearly means it. He doesn’t seem to care about our customers’ budgets or the going rates for CBS programming.”

But critics contend Time Warner Cable does not come to the table with clean hands on the issue of expensive carriage fees. Time Warner Cable seemed less concerned about the skyrocketing costs of cable programming when it set high asking prices for TWC-owned regional sports networks SportsNet and TWC Deportes.

CBS says it deserves at least as much as what Time Warner Cable pays Time Warner Entertainment’s TNT, which reportedly charges at least $1 a subscriber.

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CBS is now running this ad in New York City warning Time Warner Cable customers they are about to lose WCBS-TV, the local CBS affiliate.  (1 minute)

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Not so fast, says Time Warner Cable. CBS wants 600% more for WCBS, driving up the price customers pay for cable television. (1 minute)

If no agreement is reached, CBS expects customers will lose access to its network-0wned affiliates starting at 5pm Wednesday afternoon. Although most media reports are focused on the fact CBS stations in New York, Los Angeles, and Dallas are affected, not all are CBS affiliates. In fact, customers in a few other cities will also find their CBS-owned stations dropped:

• New York: WCBS (TWC)
• Los Angeles: KCBS, KCAL (TWC)
• Dallas-Ft. Worth: KTVT, KTXA (TWC)
• St. Petersburg-Tampa: WTOG (Bright House)
• Riverhead (Long Island): WLNY (TWC)

Some Bright House customers are also affected by dispute.

The Wall Street Journal reported that Time Warner Cable and Bright House would also drop Showtime from lineups across the country in a retaliatory move, but this was not confirmed by either cable company.

Station owners are seeking higher retransmission consent payments from cable and satellite operators to establish additional sources of revenue. Pay television customers ultimately foot the bill with higher priced cable television service. As prices rise, pay television operators increasingly worry customers will either defect to a competitor or cut the cable television cord for good. Some operators are adopting a tougher stance, willing to drop stations from the lineup.

Most station owners believe the larger number of stations they own or control, the less likely a cable operator will actually throw a station off the lineup. This month, Wisconsin-based Journal Broadcast Group is threatened with the loss of nearly half of its 15 television stations on Time Warner Cable systems in Wisconsin, Nebraska, and California:

• WTMJ Milwaukee
• KMTV Omaha
• WGBA Green Bay/Appleton, Wisc.
• WACY Green Bay/Appleton, Wisc.
• KMIR Palm Springs, Calif.
• KPSE Palm Springs, Calif.

Bigger is better

Some stations have been off the lineup since July 10 in some markets, with digital sub-channels first removed by Time Warner Cable in a warning shot in others.

Larger station owners like Sinclair Broadcast Group have felt less threatened. The more stations under negotiation, the more leverage station owners have in contract renewal talks.

Sinclair is further boosting its position in the local TV station business, spending almost $2 billion in the last 18 months buying 81 more television stations.

Sinclair owns and operates, programs or provides advertising sales services to 140 television stations in 72 markets nationwide. They are a force to be reckoned with. Despite angry words over the station owner’s asking price, both Dish Networks and DirecTV renewed their carriage agreements with Sinclair without disrupting viewing.

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The Wall Street Journal’s “Moneybeat” looks into the retransmission dispute between CBS and Time Warner Cable and what impact it may have on viewers. (5 minutes)

Time Warner Cable will get up to $4 million in tax breaks courtesy of New York taxpayers to create a new call center in Buffalo’s now defunct Sheehan Hospital.

Time Warner Cable donated $175,000 to the New York Democratic State Committee that aired a series of pro-Gov. Andrew Cuomo ads, including one touting the governor’s efforts to get corporate money out of politics.

The cable company donated the funds to the Committee’s “housekeeping” account, exempt from New York’s campaign finance laws which ordinarily limit the maximum amount a corporation can contribute to $5,000. The New York Democrats spent nearly $5.3 million to air the advertising on stations across the state this spring.

Asked how Cuomo could justify promoting campaign finance reform while exploiting various loopholes to accept unlimited corporate contributions, Cuomo told the Albany Times-Union, “It’s not a loophole — it’s the law.”

“You can only live within the system that exists,” Cuomo added. “As soon as the campaign finance system is changed — and I’ve worked very hard to change it, I’ll continue to work very hard to change it — no one will be more pleased than myself.”

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Time Warner Cable, CBS, a giant teacher’s union and other large corporations helped pay to run this ad featuring New York Gov. Andrew Cuomo promising to cut the influence of money in politics. (1 minute)

Time Warner Cable was hardly alone. Other major donors were rooted out by the newspaper’s Capitol Confidential:

• — $250,000 came from “Educators United,” an offshoot of the United Federation of Teachers.
• — $200,000 arrived from the Hospitals Insurance Corporation.
• — $750,000 from George Soros. His son, Jonathan, has been a vocal proponent of establishing a system of public campaign finance.
• — Lucy Waletzky and Larry Rockefeller, children of Laurance Rockefeller and niece and nephew to Gov. Nelson A. and uber-banker David, each gave $25,000.
• — Hedge funder James Simons, the founder of Renaissance Technologies, gave $1,000,000.
• — $102,000 from “New Yorkers for Affordable Housing,” whatever the hell that is, an entity that shares an address with The Arker Companies’ Queens headquarters.
• — $50,000 from SONY Pictures Entertainment, $25,000 from Paramount Pictures and $50,000 from CBS.
• — $350,000 from Brookfield Properties, $200,000 from Tishman-Speyer and $100,000 from The Related Companies, all major New York City real estate firms.
• — $150,000 from billionaire fertilizer tycoon Alexander Rovt.
• — $200,000 from Leonard Litwin. Oh wait, I’m sorry: mega-donor Leonard Litwin’s name doesn’t appear in the filing. As is his wont, Litwin funneled his donations through various property-based LLCs he controls. New York’s glorious campaign finance laws treat an LLC like an individual.

Virtually all the donors have some business or regulatory dealings with the state government.

Last month, the governor’s office announced Time Warner Cable was being given taxpayer assistance to take over office space in the former Sheehan Hospital in Buffalo.

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This week, the Erie County Industrial Agency approved $757,000 in additional tax abatements for Time Warner Cable. That does not include the $3.1 million in state and local tax breaks already granted the cable company in return for job creation at a new call center being opened in Buffalo. WGRZ-TV reports. (1 minute)

John Malone’s power play for a Charter Communications’ takeover of Time Warner Cable would leave the nation’s second largest cable operator $60 billion in debt and has already cost creditors holding Time Warner Cable bonds $1.8 billion in value as markets react to the rumors of a leveraged buyout.

Two people familiar with ongoing private discussions report Liberty Media is prepared to borrow against its own or Time Warner Cable’s assets to put the deal together, spiking debt levels into junk territory. Charter itself already has the most debt among junk-rated U.S. cable companies, with $12.8 billion owed, according to Bloomberg.

Malone has structured highly leveraged acquisition deals throughout his history in the cable industry, borrowing heavily to finance merger deals and then raising subscriber rates to boost revenue to cut debt.

Time Warner Cable is highly exposed to a hostile takeover because its bonds lack safety provisions that would discourage the kind of acquisition Malone is attempting. Adam Cohen, founder of independent research company Covenant Review said Time Warner’s bonds are easily transferable to Charter’s name.

“The combined entity will be junk status, and the Time Warner bonds could be even junkier than the Charter bonds,” Cohen said in a telephone interview with Bloomberg. “This could be one of the worst covenant-related disasters ever for investment-grade bondholders.”

Moody’s senior vice president Neil Begley has suggested Time Warner Cable seriously consider “the Moe Green Strategy,” a nod to The Godfather.

‘You don’t buy Moe Green, Moe Green buys you!’

Begley suggested Time Warner Cable could consider putting in a bid to acquire Charter just to keep Malone on the outside looking in. That might be more effective than Time Warner acquiring a number of smaller cable operators like Cablevision, Mediacom, Cable ONE, and others to outflank Malone.

Malone is using an investment in Charter Communications as a springboard to launch his vision of a tightly consolidated cable industry, with just a handful of players providing service, instead of the dozen or so significant cable companies now in business. Malone sees Comcast as untouchable, so rolling up other operators around a Time Warner-Charter deal would be the next best thing, analysts suggest.

Cablevision will officially boost its broadband speed packages next Monday in a move to stay competitive with Verizon FiOS, which has been highly successful getting people to upgrade to 50/25Mbps service for just $10 more than customers pay for Verizon’s standard tier (15/5Mbps).

Broadband Reports obtained an internal memo outlining the new speeds, confirming the details we had been tipped off about by Cablevision employees last month. Cablevision customers on Long Island tell Stop the Cap! the speed upgrades have already been launched in their area. Customers can find out if they have the upgrade by briefly unplugging their cable modem’s power cord, allowing the modem to reset.

Cablevision speeds are far better than those offered by Time Warner Cable, which serves much of the rest of New York City, especially for uploads. Time Warner tops out at 5Mbps for upstream speeds in the northeast. Customers with older equipment will need a DOCSIS 3 modem to get the Ultra-level speeds.

Legacy Boost/Boost Plus customers will see a massive speed hike to 101/35Mbps at no extra charge if the memo is correct. Newer customers signed up for Boost will be upgraded to 50/25Mbps service. We have yet to confirm whether these upgrades have actually occurred yet.

Time Warner Cable won’t engage in an expensive bidding war for ownership of Hulu so it is trying to convince the online video venture’s current owners not to sell.

Sources tell Bloomberg News the cable company has offered to buy a minority stake in the online video streaming service alongside its current owners, which include Comcast-NBC, Fox Broadcasting, and Walt Disney-ABC.

If Hulu accepted the offer, the other bidders’ offers may not even be entertained.

Among those filing binding bids/proposals with Hulu as of the July 5 deadline:

• DirecTV, which reportedly wants to convert Hulu into an online companion to its satellite dish service for the benefit of its satellite subscribers;
• AT&T and investment firm Chernin Group, which submitted a  joint bid, presumably to beef up online video options for U-verse customers.

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Bloomberg News discusses how the various bidders for Hulu would adapt the service for their own purposes. It’s all about bulking up online video offerings.  (4 minutes)

Hulu’s new owners could continue to offer the service much the same way it is provided today, with a free and pay version. But most expect the new owners will throw up a programming “pay wall,” requiring users to authenticate themselves as a pay television customer before they can watch Hulu programming. If Time Warner Cable acquired a minority interest and the current owners stayed in place, Time Warner Cable TV customers could benefit from free access to certain premium Hulu content, now sold to others for $8 a month. That premium content would presumably be available to U-verse customers if AT&T emerges the top bidder, or DirecTV could offer Hulu to satellite subscribers to better compete with cable companies’ on-demand offerings.

Hulu’s influence will be shifted away from broadcast networks and more towards pay television platforms regardless of who wins the bidding. That could end up harming the major television networks that provide Hulu’s most popular content. Many of Hulu’s viewers are cord-cutters who do not subscribe to cable or satellite television. Placing Hulu’s programming off-limits to non-paying customers could force a return to pirating shows from peer-to-peer networks or third-party, unauthorized website viewing.

Online video rights are so important to cable operators and upstarts like Intel, which wants to launch its own online cable-TV like service, providers are willing to pay a premium for streaming rights.

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Richard Greenfield, analyst at BTIG, and Scott Galloway, chairman and founder of Firebrand Partners, discuss Hulu and the ability to stream on multiple platforms. They speak on Bloomberg Television’s “Bloomberg Surveillance.” (4 minutes)

The Los Angeles Times reports that pay TV distributors are in a rush to make deals, not only to offer more viewing options for customers, but to potentially get rid of expensive and cumbersome set-top boxes.

Interlopers like Intel, Apple, and Google who want to break into the business have not had an easy time dealing with programmers afraid of alienating their biggest customers. Even DirecTV, which has done business with some of the largest cable networks in the country for well over a decade still meets some resistance.

Acquiring Hulu could be an important part of DirecTV’s strategy to develop the types of services satellite TV has yet to manage well. On-demand programming is no easy task for satellite providers. But if DirecTV acquired Hulu, satellite customers could find DirecTV-branded on-demand viewing through the Internet. The Times speculates DirecTV could even build an online subscription service for subscribers who don’t want a satellite dish, receiving the same lineup of programming satellite customers now watch.

Distributors that acquire enough online streaming rights could even launch virtual cable systems in other companies’ territories, potentially pitting Comcast against Time Warner Cable, but few expect cable operators to compete against each other.