Fox & Time Warner Strike "Reasonable Deal"...Murdoch Wins!

News Corp., Time Warner Reach Deal to Keep Fox Programming On Air


The Fox television network and Time Warner Cable reached a programming deal in principle on Friday, after leaving millions of people in the lurch about whether they'd be able to see an anticipated college football matchup and other shows on cable TV.

Fox had threatened to force Time Warner Cable and Bright House Networks to drop the Fox broadcast signal from 14 of its TV stations and half a dozen of its cable channels as a contract expired at midnight Thursday.

But signals were extended into Friday as talks continued, allowing more than 6 million cable subscribers in New York, Los Angeles, Orlando, Fla., and other markets to tune into the Sugar Bowl and other programming.

The deal, which included Bright House, ended a week of public sparring that had some consumers worried they'd miss the matchup between highly ranked Florida and Cincinnati that started at 8:30 p.m. EST.

"I think it's all corporate gamesmanship and consumers are caught in the crossfire," said Richard Anderson, a 55-year-old city manager in Apopka, Fla., who had eight people at his place ready to drive four miles to root on the Gators at the residence of a friend who had satellite TV.

Anderson had tried unsuccessfully this week to get an injunction blocking Fox from pulling its signal.

Neither company would divulge the terms of the deal. Fox wanted to be paid $1 per cable subscriber each month for the broadcast signal it had once given away freely from the stations it owns. Other Fox affiliate stations that are owned by different companies had already cut deals to be paid by cable operators for a fraction of that fee.

"We're pleased that, after months of negotiations, we were able to reach a fair agreement with Time Warner Cable — one that recognizes the value of our programming," said Chase Carey, chief operating officer at News Corp., which owns Fox.

Time Warner Cable Inc. Chief Executive Glenn Britt said he was "happy to have reached a reasonable deal with no disruption in programming for our customers."

Politicians and regulators had gotten in on the dispute, especially because Fox sends its signals out freely on public airwaves on a frequency it obtained for nothing, with the obligation that it serve the public interest.

Federal Communications Commission Chairman Julius Genachowski congratulated both companies and his staff for the deal.

But Sen. John Kerry, D-Mass., raised concerns about the effectiveness of a 1992 cable law that allows broadcasters to seek compensation from cable and satellite operators for their signals.

"I will reach out to both parties, the FCC, and consumer advocates to assess lessons learned from this dispute and what, if any, changes to law are necessary," Kerry said in a statement.

Fox said it could no longer give away its stations' signals to cable companies because the network is facing stiff competition from cable channels, such as the Walt Disney Co.'s ESPN, which earn subscriber fees on top of advertising dollars.

That dual revenue stream allowed ESPN to outbid Fox for high-priced events such as the college football Bowl Championship Series — including the Sugar Bowl, Fiesta Bowl and Orange Bowl that are now on Fox — from 2011 to 2013.

Time Warner Cable, in the meantime, had vowed to hold the line on cable bill increases, and said the vast of majority of viewers who went to its Web site, www.rolloverorgettough.com, urged it to "get tough" and fight back against higher costs.

Neither side would have fared well if signals had been pulled.

Fox would have lost viewers and advertising dollars for some highly anticipated shows this month, including the 20th anniversary special of "The Simpsons" on Jan. 10, and the season premieres of "American Idol" on Jan. 12 and "24" on Jan. 17. It had urged viewers to go to its Web site, www.keepfoxon.com.

If the signal had been dropped, cable operators could have angered customers, who can switch to competitive television providers such as DirecTV or AT&T's U-verse that carry Fox programming.

Satellite TV provider Dish Network, which already has a deal with Fox, had been heavily advertising in newspapers, radio and TV telling Time Warner Cable customers, "Don't risk missing your favorite shows."

TV viewers could also have decided to cut off their cable entirely and watched the Fox broadcast network using an antenna with a digital TV or converter box.

Separately, Cablevision Systems Corp. said early Friday it had dropped HGTV and Food Network for its 3.1 million subscribers in New York, New Jersey and Connecticut in a fee dispute with Scripps Networks Interactive Inc., based in Cincinnati.

Time Warner Cable continued to carry Food Network and Great American Country under a temporary deal extension as its talks with Scripps continued.

Fox and CBS signals from Sinclair Broadcasting Group Inc. stations in markets such as Des Moines and Cedar Rapids, Iowa, also continued to be carried by cable company Mediacom Communications Corp. in a temporary deal extension to Jan. 8.



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Sources: Fox News, Newscorp, TIME, Keepfoxon.com, Google Maps

Time Warner vs Fox Battle Exposes High Cable Fees, Partisan Politics

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Broadcasters Battling for Cable Fees


The nearly billion-dollar battle between broadcasters and cable operators over programming fees has gone public.

The News Corporation is threatening to remove its Fox stations from Time Warner Cable systems at the end of this week if the cable company does not agree to pay sizable subscriber fees, the same way it does for cable channels.

In negotiations, the News Corporation is pushing for about $1 a month for each subscriber, potentially setting a precedent for broadcasters that are seeking a new revenue stream to offset advertising declines.

Time Warner Cable is playing hardball, running an advertising campaign to prepare viewers for the prospect of a January without college bowl games or “American Idol.” The company’s so-called retransmission agreements covering Fox’s stations in New York, Los Angeles, Dallas, Orlando and other cities expire on Dec. 31.

Fights over retransmission affect every person who pays for television, because the fees are ultimately added to monthly bills. It will “without a doubt translate to increasing costs for consumers that buy packages of programming,” said Melinda Witmer, the chief programming officer for Time Warner Cable. (It announced annual rate increases for customers this month.)

The News Corporation is demanding the money on behalf of its 27 owned stations, but it is also pressuring about 150 affiliates for a share of their retransmission payments.

The public posturing is the clearest sign yet that the owners of Fox, CBS and other over-the-air networks are demanding substantial amounts from the cable operators that carry their content into millions of homes.

For most of the last two decades, the owners of networks effectively gave away the retransmission rights for their stations in exchange for prime positions on cable systems. Now, however, beleaguered networks and their affiliates want direct payments for their programming. Cable channels like TNT and ESPN operate the same way; they make money both from advertising and from subscriber fees.

Some over-the-air stations started to wring fees out of smaller carriers several years ago. For stations, the fees normally amount to nickels, dimes and occasionally quarters for each subscriber each month. But Fox is asking for much more.

The companies declined to comment about the specifics to the negotiations, but people close to the matter confirmed the $1 demand by Fox’s owned and operated stations.

“Time Warner packages and resells our signal for its customers, and they make a lot of money doing it. We simply want to seek fair compensation for that,” said Mike Hopkins, Fox’s president of affiliate sales and marketing.

Mr. Hopkins says the dispute is part of a larger negotiation with Time Warner Cable that also involves some of the News Corporation’s cable channels, like FX and the Speed Channel.

The talks — which are about to start in earnest in Los Angeles — pit Glenn A. Britt, the chief executive of Time Warner Cable, against Chase Carey, the new president and chief operating officer of the News Corporation.

Mr. Carey has experience on the other end of the table: he ran DirecTV, the satellite distributor, until last June. He has said publicly that Fox is worth $5 a month, given its sports programming and prime-time hits. That would make Fox even more valuable than ESPN, the most costly cable channel, which earns about $4 for each subscriber.

“We realize this is going to be a tough challenge,” Rupert Murdoch, the chairman of the News Corporation, told investors two months ago, “but we’re determined to take a leadership position in creating an economic template for the future.”

In an assessment last week, the Miller Tabak analyst David C. Joyce said the talks were “precedent-setting” for Fox. Some analysts believe the companies will reach a compromise of 50 to 60 cents for each subscriber.

Satellite operators like the Dish Network and telecommunications companies like Verizon have generally been more willing than cable operators to compensate local stations, television executives say. But in the last year, CBS reached significant deals with Time Warner Cable and Cablevision. CBS reportedly receives up to 50 cents for each subscriber, although the deals vary.

“The world has acknowledged that networks deserve to get paid for their content like cable networks get paid,” said Leslie Moonves, the chief executive of the CBS Corporation, who has been the industry’s most vocal supporter of retransmission fees.

Mr. Moonves said he expected CBS’s owned stations would earn $200 million to $250 million in retransmission revenue by 2012. All the networks are talking about retransmission “in a much more pertinent manner right now,” Mr. Moonves said.

The amount paid by cable, satellite and telecommunications operators “has grown by double digits” for each of the last three years, said Justin Nielson, an analyst for the research firm SNL Kagan. He projects that stations will earn $933 million in retransmission fees next year, up from $739 million this year.

But the fees account for just 5 percent of station revenue, according to SNL Kagan — hardly a savior for broadcasters. Cable channels, meanwhile, are on track to earn almost $28 billion from fees next year.

Creating a new front in the fight, networks like CBS and Fox are telling affiliates to start sharing the retransmission fees they receive from carriers, too. They figure that because they provide marquee programming, they should share in the fees.

“There are certain affiliates that are totally on board and get it, and there are certain affiliates that object to it,” Mr. Moonves said. “It will come to a head as the deals with station groups come up,” a multiyear process.

Between Fox and Time Warner Cable, the fight is not about whether Fox should be paid, but about how much. The cable company says that it is willing to pay for retransmission, and that it is only balking at Fox’s asking price. “There’s no question we’ve seen an increase in desperation on the broadcast side,” Ms. Witmer said.

Ahead of several renewal fights, the company called on customers to “get tough” in TV commercials and print ads that claimed that networks like Fox were “demanding price increases as high as 300 percent.” The commercials played like political ads, complete with ornaments falling off an animated Christmas tree.

Fox responded with a campaign Web site of its own that said it was merely asking for “fair value compensation.” It noted that TNT, a cable channel with a fraction of Fox’s budget, earns about $1 per subscriber. On Monday night it informed viewers across the country about the feud in graphics on the screen during the medical drama “House.”

Ms. Witmer said there were crucial differences between Fox, which is available over the air, and TNT, which is a “cable product.” She said Time Warner Cable was concerned about the amount of programming that Fox puts on the Internet, undermining the cable business model. Unlike broadcasters, she added, cable channels provide carriers with advertising time.

Fox will argue in the coming days that Time Warner Cable can easily afford to pay more for its signal. Mr. Hopkins said Monday that the cable operator’s rate increases in New York alone, which go into effect in January, “would be more than enough to pay for Fox in all these markets.”

A Time Warner Cable spokesman, Alex Dudley, said the “single biggest factor in rate increases are egregious acts by programmers like Fox.”

Caught in the middle are TV viewers. Last week Senator John Kerry, Democrat of Massachusetts, called on both sides to strike a deal because, he said, “millions of football fans are depending on it.”

In a letter to Mr. Britt and Mr. Carey, he suggested that the stations remain available to cable customers if the two sides fail to reach a deal by Jan. 1. For how long? Mr. Kerry wrote, “Through the college bowl season.”

NOTE:

This article has been revised to reflect the following correction:

Correction: December 30, 2009
An article on Tuesday about a battle between broadcast networks and cable companies over programming fees referred incorrectly to Alex Dudley, a spokesman for Time Warner Cable.



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Sources: NY Times, MSNBC, Newscorp, Fox Broadcasting, Time Warner Cable, Bloomberg News, Fox News, Youtube, Google Maps