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When two companies depend on each other, that dependence also holds a means of pressure. A network needs cable systems to reach its viewers. A cable system needs the networks so that its customers keep paying. What happens when one side cuts the connection? The 2013 dispute between CBS and Time Warner Cable is a textbook example of what Brinkmanship looks like in business.
The fight over fees
Situation
In the United States, cable operators pay the major networks fees for the right to carry their programming. In 2013, the contracts between the network CBS and the cable operator Time Warner Cable expire. CBS wants considerably more money. Time Warner Cable wants to pay less. The negotiations make no progress.
Link to the principle
Both sides hold a threat in their hands. CBS can pull its signal; Time Warner Cable can stop carrying it. Each of these threats also hurts the side that carries it out. That is exactly what turns the conflict into brinkmanship.
The screen goes dark
Situation
On August 2, 2013, CBS disappears from Time Warner Cable’s lineup in several major cities, above all in New York, Los Angeles and Dallas. According to CNN, about three million viewers are affected. Along with CBS, the premium channels Showtime and The Movie Channel as well as the Smithsonian Channel go dark.
Link to the principle
Now the risk is no longer a thought experiment. CBS loses reach and advertising impact. Time Warner Cable risks customers canceling and switching to the competition. Both hope that the other side will feel the pain sooner.
The clock is ticking
Situation
The dispute drags on through all of August. Industry observers predict that two events will force an agreement: the US Open tennis tournament, which CBS broadcasts, and the start of the NFL football season in September.
Link to the principle
In brinkmanship, the pressure does not grow evenly. There are dates on which the damage suddenly grows. If you know these dates, you know when the other side will have to cave. For Time Warner Cable, a season opener without football on CBS was a very high risk.
The agreement
Situation
On Monday, September 2, 2013, Labor Day, both sides announce an agreement. The programming returns that same evening. The terms are not made public. Time Warner Cable’s chief executive, Glenn Britt, says, in essence, that the company did not get everything it wanted but is better off than at the start. According to a report by NPR, CBS chief executive Leslie Moonves writes to his employees that CBS will receive fair compensation and can also exploit its content on new platforms.
Link to the principle
Both sides declare themselves the winner. That is typical. Whoever gives way needs a version of events they can live with. Because the terms remain secret, only the statements give a clue as to who achieved more. Moonves’s words sound like a success for CBS.
Who pays the price
Situation
After the agreement, a Time Warner Cable spokesperson says that many customers had called but that the great majority had not canceled. Mignon Clyburn, acting chairwoman of the FCC, the U.S. media regulator, warns after the agreement that media companies must put the interests of their audiences above other interests.
Link to the principle
In brinkmanship between two companies, the customers often stand at the edge. They bear part of the risk without being asked. That is one reason why regulators take a critical view of such conflicts.
Key takeaways
Key lessons
- Mutual dependence is always a means of pressure as well.
- Watch for dates on which the damage for the other side rises sharply.
- Assess honestly how long you yourself can endure the damage.
- Leave the other side a story that lets them give way.
- Think of the others your conflict affects.
Summary
In a dispute over retransmission fees, CBS and Time Warner Cable cut off the programming for about three million viewers for a month in 2013. Both sides accepted damage in order to make the other give in. The approaching start of the football season increased the pressure, and on September 2 an agreement was reached whose terms remained secret.
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