Tuesday, July 23, 2013

TW/CBS Negotiations

Time-Warner and CBS are in the middle of a nasty negotiation dispute over how of a fee Time-Warner should pay to carry CBS programming. This has happened before. This time though, websites like Aereo provide viewers with an increased ability to view CBS over the Internet. According to the New York Times,
While Time Warner Cable does not seem ready or willing to deploy Aereo-like technology, a spokeswoman, Maureen Huff, said Sunday that it would recommend Aereo to its New York subscribers if CBS was blacked out. The distributor may also underline the fact that Aereo, which normally costs $8 a month, offers a 30-day free trial. (Ms. Huff also pointed out that many CBS shows are available online on a delayed basis, and that “all of CBS’s broadcast TV programming is available free over-the-air,” so subscribers can use antennas.)

This raises the disagreement value for Time-Warner and likely lowers its fee.

1 comment:

  1. The game of chicken is an interesting game because there are several potential outcomes. Typically, there are two equilibria where both players lose or both players win. Additionally, one player may win over the other. When equilibrium is unlikely, the player who flinches first loses. There are several factors that determine whether a player will or will not flinch. The primary factor determining action is bargaining power. In other words, the player with less bargaining power will most likely face reduced options. There are several ways to increase bargaining power. The first, the player willing to commit to a course of action generally experiences more bargaining power, if the opposing player believes the commitment to act or not act. Also to according to Froeb, “to improve our own bargaining position, improve your outside option, or decrease that of your opponent.” (Froeb, MCCann, Shor, & Ward, 2014 pp. 190) This advice is what has given CBS the advantage over TWC. Through the internet, viewers were still able to enjoy CBS despite the blackout. This gave CBS an outside option. The impact on TWC was significant, with profits dropping 34% as a result of the CBS blackout. (Stock, 2013) Clearly, CBS had the stronger position, committed to that position, and eventually prevailed over the TWC in the bargaining game of chicken.