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What the DirecTV-CBS Contract Dispute Means for Advertisers

What the DirecTV-CBS Contract Dispute Means for Advertisers

CBS Networks have gone dark on networks from New York to Los Angeles. The AT&T owned DirectTV and U-Verse were unable to reach a contract agreement with CBS late last month, which has translated into viewers across the country losing access to CBS channels. 

In response, the network (home to popular shows like NCIS and The Late Show) is directing viewers to KeepCBS.com, which includes instructions to post to DirectTV’s social media, email the AT&T company directly or to switch providers altogether. 

The blackout includes over 100 CBS stations and affiliates, and affects over 6 million customers.

Where the Dispute Stands 

“While CBS has made every effort to avoid this blackout, we won’t agree to terms that undervalue our hit programming enjoyed by nearly 240 million viewers across all dayparts last season on ‘America’s Most-Watched Network,’”, CBS wrote in a statement. “Those loyal viewers are now bearing the burden for AT&T’s unwillingness to negotiate a deal that reflects the current marketplace.”

For its part, AT&T says it offered the highest fee it offers to any national broadcaster. “The bid asked candidly is not that wide, but it’s kind of an interesting dynamic,” said AT&T Chairman and CEO Randall Stephenson in a call with investors. “We sent, that was a reasonable, fair offer over five days ago, and that’s been crickets. We haven’t heard anything.” In another statement, AT&T said they “were willing to continue to negotiate and also offered to pay CBS an unprecedented rate increase.”

Both parties seem to be waiting each other out.

How the Dispute Affects Advertisers

Trading blame aside, it’s clear that the blackouts will affect advertisers if the dispute isn’t resolved soon. 

CBS has contracts with nearly 900 companies in total. The network’s top advertisers include Pfizer, Procter & Gamble, Ford, General Motors and Nestle. The top industries advertising on CBS are pharma, financial and auto. 

But the biggest spenders may not be as impacted as brands advertising around CBS’ pro football coverage. Over 175 companies bought on CBS and CBS Sports during pro football coverage for last portion of Q3 this year. The top advertisers in this segment include Verizon, Geico, Ford, Anheuser Busch and (ironically) AT&T. 

The upcoming pro football coverage will be felt the most by CBS advertisers, but it also gives CBS unique leverage in the ongoing dispute. 

CBS may be placed in a tight spot with its advertisers, they also seem to hold most of the cards in the contract dispute. “CBS believes that as a purveyor of some of the nation’s most sought-after televised entertainment options, it enjoys far more bargaining power than AT&T,” writes Anthony Crupi at AdAge. 

The impending football season helped CBS resolve a similar spat with Time Warner Cable in 2013. Football fans and ad execs alike are hoping a similar middle ground can be reached this month.

Dish and Fox are facing a similar contract dispute — and will have to bring it to a rapid conclusion as fans expect baseball’s stretch run and football’s preseason ramp up. 

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