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CBS, Comcast Hook Up On Retransmission Deal

CBS, which has been seeking cash payments from cable operators, said Monday it signed a 10-year agreement with Comcast, the biggest cable operator, that provides for retransmission consent of CBS Television Stations until 2020.

The deal also provides for carriage of all Showtime channels, the launch of the Smithsonian Channel and expanded distribution of CBS College Sports.

Comcast also gets expanded access to CBS and Showtime content for its on demand and online services.

Financial terms of the deal were not disclosed, but CBS maintained that it expects to reach its goal of $250 million in retransmission revenue in the next couple of years. CBS reports earnings on Tuesday and might be asked about the financial implications of the agreement by analysts.

Anthony DiClemente, media and entertainment analyst at Barclays Capital projects, said that CBS will get about 50 cents per subscriber per month from Comcast starting in 2012, when the two companies' original agreement expires.

"We believe the deal also includes healthy escalators which would step up pricing in later years such that CBS will receive well more than $1 per sub by the end of the time horizon," DiClemente wrote in a note to clients. "Assuming more than 12 million CBS owned and operated subscribers within the Comcast footprint, this would imply roughly $75 million of payment from Comcast to CBS in 2012."      

After years of exchanging their retransmission rights for the launch of new cable channels, the owners of broadcast networks have been seeking cash for the rights to carry their owned and operated stations. Earlier this year News Corp. reached an agreement with Time Warner Cable that paid the broadcaster about 70 cents per subscriber per month, according to analysts.

Among the major media conglomerates, CBS has the fewest cable assets and is most dependent on its broadcast channel and needed retransmission revenue to continue to be competitive with its more diversified competitors.

The issue has led to some angry rhetoric and to some networks being taken off the air. CablevisionSystems subscribers weren't able to see the beginning of the Oscars earlier this year because a retrans deal was being worked out.

That makes CBS' ability to work out a deal with Comcast fairly quietly very interesting. Industry observers have been looking ahead to the expiration of Time Warner Cable's deal with Walt Disney Co. at the end of the month and don't expect it to be settled that peacefully. It is certainly in Comcast's interests not to be in the midst of a high-profile carriage dispute at the same time it is looking to get FCC and Justice approval for the NBCU deal. Among the criticisms of the deal is that Comcast could get more leverage in retrans negotiations.

"This agreement demonstrates the enduring value of CBS's content across our Company," said Leslie Moonves, president and CEO, CBS Corporation. "Beyond securing another key retransmission consent agreement for CBS Entertainment, News and Sports programming, it also provides for the long-term future of Showtime Network's original programming and movies on Comcast's platform, and expands the reach of our growing College Sports and Smithsonian franchises."

"We are very pleasedto have reached a long-term agreement with CBS to distribute its valuable programming across our multiple platforms," said Brian L. Roberts, chairman andCEO, Comcast Corporation. "In this time of rapidly changing technology and viewership interest, we were able to structure a deal that gives customers the content they want without any threat of disrupting their service."