Time Warner Cable Inc (TWC): Can CBS Corporation (CBS) Keep Up Its Winning Ways?

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Plus, CBS’ Showtime cable channel has stepped up and competed ferociously with powerful HBO, introducing a score of creative dramas and comedies with seemingly offbeat story lines, such as Homeland, Weeds, and Dexter. This is now essential because Netflix, sporting the successful homegrown shows House of Cards and Orange Is the New Black, has challenged the traditional cable networks with entertainment content of its own.

Why does this matter to bottom-line investors? CBS has impressed Wall Street by successfully leveraging the popularity of its programs by selling the broadcast rights to them in a variety of ways, all of which enrich the network and, ultimately, the CBS stockholders.

For now, CBS is enjoying the spoils of being No. 1 in TV programming.

The Los Angeles Times pointed out that Time Warner Cable Inc (NYSE:TWC) head Glenn Britt suggested in a letter to Moonves that CBS could become an “a la carte channel” to allow pay-television customers to decide whether they want to pay for it.

CBS’ aggressive stance toward entities such as Time Warner Cable Inc (NYSE:TWC) may pay off well for shareholders in the short term, but what about taking the long view? Certainly, today CBS recognizes that it has the best original TV content in town — the key to its financial stability and strength — and expects prospective partners to pony up for it. CBS doesn’t seem to mind squeezing partners.

But is it squeezing too tight and creating resentment?

Analyst Wieser observes, “We have become increasingly concerned about long-term prospects for CBS.” Those worries center on CBS’ “aggressive and very public efforts” to receive retransmission revenue from its distributors. The network’s “overly aggressive legal campaign against Aereo” raises the prospect that Congress or the FCC will try to curtail CBS’ negotiating strength in the period beyond 2014.

Wall Street also frets that advertising agencies will alter the way in which their media-agency representatives do deals in favor of models that bring the upper hand to advertisers, and not media companies. “The risk is real,” Wieser stressed.

CBS is also banking on the robust financial health of prospective global partners, who can continue to afford to pay the top dollar that CBS expects and demands for its American hits. Overseas, many successful American-generated TV shows and movies are wildly popular. But the worldwide possibility of advertising-agency consolidation could reduce the strength of some foreign television companies, which means they would not be able to keep paying top dollar to CBS.

Ultimately, CBS stock presents a fascinating case of a company that recognizes an enviable point: Its partners need it more than CBS needs them. These are the spoils of being the most popular broadcaster.

But if CBS ever slips from that lofty perch, its stock market investors may face a harsh reality.

The article Can CBS Keep Up Its Winning Ways? originally appeared on Fool.com and is written by Jon Friedman.

Fool contributor Jon Friedman has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Goldman Sachs, and Netflix. The Motley Fool owns shares of Berkshire Hathaway and Netflix.

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