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By Benjamin Mullin and Drew FitzGerald
Programming from CBS Corp. went dark for about 6.6 million viewers of AT&T's DirecTV, DirecTV Now and U-verse packages Saturday morning after the two companies couldn't come to terms on a new distribution agreement.
CBS said this is the first time it has gone dark on a pay-TV provider since 2017, when the broadcaster went dark on Dish Network Corp.'s systems for a few days before the two companies reached an agreement.
The company in recent years has reached deals with providers including Charter Communications Inc., Verizon Communications Inc. and Hearst Television Inc.
The blackout affects DirecTV and U-verse viewers in more than a dozen cities, including New York, Los Angeles and Chicago, depriving them of shows such as "The Late Show with Stephen Colbert," "Big Brother" and "CBS Evening News."
The dispute centers on how much AT&T is willing to pay CBS for the right to show its channels on its satellite and cable-TV packages. CBS said that it is seeking "fair market value" for its channels, adding that AT&T is proposing terms well below those agreed to by its competitors.
AT&T fired back by saying that CBS turned down "an unprecedented rate increase," noting that its offer is the highest fee that the company pays to any major broadcast network group.
"We want these CBS owned-and-operated local broadcast stations in our lineup," AT&T said earlier Friday. "But customers today are demanding more value from their TV offerings."
A person close to CBS said that the company last struck a distribution agreement with DirecTV in 2012, and that agreement is nowhere close to current market rates.
CBS could gain more leverage during negotiations if the blackout drags on for more than a month. CBS has rights to broadcast National Football League games, popular programming for viewers across the U.S. CBS coverage of the regular season starts on Sept. 8, with the preseason beginning on Aug. 18.
CBS is also planning to debut its slate of original programming on weeknights beginning Sept. 23, with new shows including "All Rise" and "The Unicorn."
The blackout echoes a similar carriage dispute between CBS and Time Warner Cable in the summer of 2013. The blackout, which began in August, concluded in September a few days before the beginning of the regular NFL season. Charter Communications Inc. later acquired Time Warner Cable.
There are some differences, however. That blackout began two weeks closer to the NFL season than the latest dispute between CBS and AT&T. And apps like Locast, which allow viewers to watch over-the-air programming online free-of-charge, have given viewers an alternative to the traditional pay-TV bundle.
A person familiar with AT&T's plans said the company is planning to direct its customers toward alternatives such as Locast and local channel connector devices that will allow them to watch NFL games.
As cord-cutting puts pressure on cable and satellite providers, programming blackouts have become increasingly common.
Pay-TV companies, whose viewers are abandoning the traditional cable bundle for direct-to-consumer streaming services such as Netflix, are loath to pay more for programming that fewer customers are viewing.
Programming providers, meanwhile, pay top dollar for sought-after programming like NFL games and are accustomed to periodic rate increases from pay-TV companies.
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com and Drew FitzGerald at email@example.com
(END) Dow Jones Newswires
July 20, 2019 02:54 ET (06:54 GMT)
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