• by Wayne Friedman , March 21, 2006

Setting the stage for upcoming battles with traditional cable operators, CBS has struck a wide-ranging and ground-breaking deal that, according to media executives, will include payment of CBS signals from Verizon's budding local franchise video business.

The deal includes analog station carriage of CBS stations on Verizon's nascent FiOS TV, its new fiber-optic TV service--as well as carriage of digital multi-cast channels that CBS stations might start up, HDTV, and video-on-demand programming for CBS' network and local content.

Verizon has about two million subscribers in franchises in a number of states: Texas, New York, and Florida, to name a few.

CBS, and broadcasters, have made retransmission deals in the past that don't include monetary payments--not directly, at least. For instance, when it was part of Viacom, any cable carriage deal made for CBS would also include MTV Networks, which definitely gets a per-subscriber fee from cable operators. TV distribution executives believe that is what CBS is getting from Verizon, and what it intends to get from other cable operators.

Leslie Moonves, chairman-CEO of CBS Corp., told analysts a few weeks ago that a major retransmission deal was in the works. Moonves said that other deals would be made as well. He expected CBS to reap "hundreds of millions" of dollars from retransmission deals.

CBS expects many new retransmission deals to be done next year--as many of its older deals will expire then.

Moonves hasn't said directly that CBS is getting monetary compensation for its Verizon deal. However, he did say in a release: "With each subscriber that Verizon's FiOS TV adds, CBS will directly benefit."

CBS would not disclose details of the agreement.

Analysts say the bigger issue comes with bigger traditional cable operators, such as with Comcast Corp.--which has around 20 million homes. Already, CBS has made a VOD programming deal with Comcast for CBS stations in markets where Comcast has cable systems. Comcast will charge $1.99 for each CBS showing of three shows--"CSI," "Survivor," and "NCIS." But the Comcast deal didn't include retransmission of CBS signals on Comcast systems.

"People have tried this before, but they have never made any headway," said Dennis McAlpine, managing partner of financial advisor and banker, McAlpine Associates, in reference to payment for retransmission deals. "[In the midst of a negotiation] the MSO sometimes cuts off their channels. If someone like Comcast--with 20 million subscribers--doesn't carry your stations, there goes a big chunk of your ratings."

CBS says the Verizon deal is the largest for the Telco. CBS's owned stations are in all Verizon TV markets, except Washington, D.C. Previously, a deal was made giving Verizon programming from CBS-owned stations.

McAlpine notes that Verizon is going after bigger fish. It's hoping that Congress approves a national cable franchise bill that could go Verizon's way.