CBS stations blacked out for DirecTV customers after deal with AT&T fails

Millions of DirecTV subscribers lost access to CBS programming this weekend after talks over a new distribution deal collapsed.

CBS Corp. and AT&T Inc., which owns El Segundo-based DirecTV, failed to reach an agreement by the Friday night deadline. Without a contract in place, AT&T no longer has authorization to include CBS station signals in its television packages in more than a dozen cities, including Los Angeles, New York, Chicago, San Francisco and Sacramento. The station signals were pulled about 11:15 p.m. Pacific time on Friday.

Nearly 6.6 million AT&T subscriber homes in the country — including 1.4 million in the Los Angeles region — lost access to their local CBS station.

CBS owns two stations in Southern California, KCBS-TV (Channel 2) and KCAL-TV (Channel 9), and both were included in the blackout. The outage extends to CBS’ Smithsonian Channel, the CBS Sports channel and four television stations owned by CBS that carry CW programming. Customers of AT&T’s other TV platforms — U-Verse and DirecTV Now, a streaming service — now are also without CBS programming.

It was not immediately clear how long the standoff would last.

“While we continue to negotiate in good faith and hope that AT&T agrees to fair terms soon, the loss of CBS programming could last a long time,” CBS said in a statement shortly after the outage began. “CBS is simply looking to receive fair value for its popular programming.”

CBS has been demanding higher carriage fees from pay-TV distributors. The New York broadcasting company has been steadily increasing the revenue it receives from so-called retransmission fees so that it is less reliant on advertising. TV ratings have been declining but programming costs are on the rise. CBS is also preparing to head into crucial contract negotiations with the NFL. Analysts say CBS and other broadcasters probably will have to fork over hundreds of millions of dollars more annually to retain their NFL game packages.

CBS uses revenue from retransmission fees to help cover the high cost of football.

But CBS’ push comes as AT&T and other pay-TV companies are struggling to hold the line on programming costs because they fear losing even more subscribers to lower-cost streaming services such as Hulu and Netflix.

“The problem is that broadcasters, like CBS, demand more money for shows that their viewers — our subscribers — are watching less,” AT&T said Friday in a letter sent to members of Congress, warning of a possible blackout. “Our customers are fed up with these tactics. They are tired of the endless cycle of price increases and blackouts.”

The Dallas-based telecommunications giant has been under increasing pressure to control costs as it grapples with a huge number of customer defections. AT&T is the nation’s largest pay-TV provider with nearly 24 million homes, but it has lost more than 1 million DirecTV subscribers in the last year. So the company has been balking at CBS’ demands.

The outage means that AT&T subscribers in major markets (where CBS owns the local station) no longer have easy access to “The Late Show with Stephen Colbert,” “CBS Sunday Morning” and “60 Minutes.”

“We had hoped to avoid any unnecessary interruption to any CBS-owned stations or national channels that some of our customers care about. But CBS refused,” AT&T said.

CBS blamed AT&T for the impasse, adding that it offered AT&T a contract extension so the two sides could try to reach an accord.

“AT&T’s willingness to deprive its customers of valuable content has become routine over the last few weeks and months, and recent negotiations have regularly resulted in carriage disputes, blackouts and popular channels being removed from their service,” CBS said in a statement.

The blackout comes as AT&T already is feeling the pinch. Last year, AT&T purchased programming company Time Warner Inc., which was the parent of CNN, HBO, Cartoon Network, TBS and the Warner Bros. film and television studio. AT&T took on enormous debt to finance that acquisition, as well as the DirecTV purchase in 2015. Investors have been encouraging AT&T to find ways to reduce costs and pay down its debt of more than $150 billion.

CBS last negotiated a retransmission agreement with DirecTV in 2012 — three years before AT&T acquired the satellite TV company. The television landscape has changed dramatically since, and CBS appears to be looking to make big gains in this round of negotiations.

This is the second time this month that AT&T has lost programming of a major television station group. In early July, AT&T was forced to drop carriage of 120 Nexstar TV stations after AT&T refused to agree to Nexstar’s demands. Nexstar, which is based in Irving, Texas, currently serves such communities as San Francisco, Fresno, Bakersfield, Colorado Springs, Colo., and Wichita, Kan.

Some members of Congress have called on Nexstar and AT&T to settle that dispute.

To prepare for the blackout, AT&T has been steering consumers to its Locast app, which enables viewers to stream programming from their ABC, CBS and other broadcast stations via the Internet. AT&T also recommended that its subscribers sign up for the CBS All Access streaming service, at $5.99 a month. In addition, consumers can install digital antennas to receive the signals of broadcast stations, including CBS. The use of such devices has been on the upswing.