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CBS, AT&T Reach New Distribution Deal

07/01/2015 | 11:35am US/Eastern

CBS Corp. and AT&T's U-Verse have reached an agreement that will keep the broadcast network's local television stations and its premium cable channel Showtime on the pay-TV distributor's systems.

The previous deal expired Tuesday and both sides negotiated through the night to avert a blackout that would have left about 2.5 million of U-Verse's six million subscribers without CBS. Several million more would have lost Showtime.

Terms of the new agreement weren't disclosed. According to industry consulting firm SNL Kagan, CBS-owned TV stations currently average monthly carriage fees of $1.30 per subscriber. In other negotiations with distributors, CBS has sought deals that would lift its fees to the $2 per subscriber range over the next several years. CBS has told investors that by 2020 it expects to reach $2 billion in revenue from pay-TV distributors as well as fees from its own affiliates in return for carrying its programming.

As part of the new pact, U-Verse will in 2016 start to carry Pop, the pop culture cable channel CBS co-owns with Lions Gate Entertainment Corp. U-Verse will also continue to carry the CBS Sports Network and its Smithsonian Channel.

CBS and U-Verse started negotiations in March but talks only heated up in recent weeks. Earlier in June, CBS had expressed frustration at what it saw as reluctance by U-Verse to move talks past the preliminary phase because it was more focused on its $49 billion acquisition of satellite broadcaster DirecTV. AT&T countered that talks were progressing and a contract would be signed before the deadline.

AT&T had indicated it was optimistic about getting government approval and closing the DirecTV purchase before the end of June. But earlier this week, AT&T extended the merger agreement while it tries to finalize regulatory signoff. DirecTV has over 20 million subscribers, and when AT&T announced the acquisition, one of the reasons cited was the leverage it would provide when negotiating with programmers.

The negotiations came at a time when distributors such as U-Verse are concerned that rising programming costs will lead subscribers to cut the cord in favor of alternatives such as Hulu and Netflix. CBS also has its own so-called over-the-top service that costs $5.99 a month but doesn't include the broadcaster's coverage of the National Football League.

Write to Joe Flint at joe.flint@wsj.com

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