Deal Also Includes CBS Television Network VOD Content
Less than two months after CBS Corp. president Leslie Moonves told Wall Street he wanted the company to be paid for its signal, CBS snagged its first major deal with Verizon and its fledgling TV service.
Verizon and CBS recently announced a comprehensive retransmission consent and video-on-demand (VOD) agreement, which includes analog, digital, multicast and high-definition rights to programming on CBS owned-and-operated television stations; local VOD content from those stations; and CBS Television Network VOD content, including such current popular network series as "CSI," "NCIS" and "Survivor."...
Terms of the deal were not announced, but sources said it was likely to average upward of 50 cents per subscriber.
While it is likely to be little in the way of revenue for a large company like CBS Corp., Verizon's retransmission consent agreement could pave the way for CBS to get paid for its signal -- and content -- in the future. When it was part of Viacom, CBS used its retransmission consent to build Viacom's cable assets. But now CBS hopes that it can use deals like the one with Verizon as a benchmark for similar pacts that will get cable operators to pay cash for CBS signal and content.
Verizon will offer the programming on Verizon FiOS TV, its new fiber-optic TV service, which is now available in seven states -- Texas, Florida, California, Virginia, Maryland, New York and Massachusetts.
All FiOS TV subscribers with a set-top box will receive the CBS Television Network VOD content at no incremental cost, which will also be true for FiOS TV subscribers in CBS O&O markets with regard to the local VOD content.
We are extremely pleased to have reached this agreement with Verizon, a company clearly on the leading edge of new media, said Moonves. "With each subscriber that Verizon's FiOS TV adds, CBS will directly benefit, and therefore, we look forward to our partnership as Verizon showcases our programming both in our O&O markets and across the country."
For Verizon, it is the largest such agreement that the company has done so far in its quest to challenge cable and satellite supremacy with a service that has been rolled out in parts of seven states. It is also the first retransmission deal made by the new CBS, though it will receive $25 million a year from former sibling Viacom Inc. for the time when CBS and MTV were packaged together to cable operators.
Prior to the deal, Verizon provided programming from the CBS owned-and-operated stations under a special agreement with CBS.
"This deal is a demonstration of willing buyers and willing sellers to get together on mutually beneficial terms," said CBS Executive VP, Martin D. Franks.
In his first meeting January 26 with Wall Street analysts as the president/CEO of the new CBS, Moonves declared that retransmission consent was a key strategy for CBS's revenues going forward.
We are going to get paid for our content by cable operators, Moonves told Wall Street analysts then. "Try running a cable operation without the Super Bowl, the Grammys, 'CSI,' the Final Four, 'Survivor,' David Letterman."
Verizon Chairman and CEO Ivan Seidenberg said, "This deal expands the market for both Verizon and CBS. For us, it means we can offer our customers the tremendously valuable content provided by the CBS Television Network and local broadcast stations. For CBS, it means they can use the bandwidth and flexibility of our fiber network to reach their customers in innovative ways."
Analyst David C. Joyce at Miller Tabak & Co. estimated in an e-mail to The Hollywood Reporter that the deal would initially give CBS only $1 million-$3 million. That could rise dramatically if CBS is successful in its campaign for cash for retransmission consent among cable and satellite operators, he said. “It could reach in the hundreds of millions of dollars, even as much as $1.3 billion at 50 cents a subscriber across 111 million television households.”
But that assumes all types of networks are carried by cable or satellite, which may not necessarily be the case, he said. "And if all types of networks need to be carried, do they have the ability to maintain that pricing?"
The VOD portion of the deal is one of the key selling points for Verizon, said Terry Denson, VP of content strategy and acquisition.
"We saw significant value to that," Denson said.
Verizon FiOS is in its infancy, with service in some parts of Texas, Florida, California, Virginia, Massachusetts, Maryland and New York.
It offers through fiber-optic lines 180 channels for $34.95 a month. Set-top box subscribers will get VOD from CBS for free.