Time Warner and Fox Reach Deal for Cable Distribution
By BRIAN STELTER
Published: January 1, 2010
The News Corporation and Time Warner Cable struck a deal just in time for the Sugar Bowl.
The two companies said Friday evening that they had agreed on new terms for a contract covering Fox stations in New York, Los Angeles, Orlando and other markets, averting a blackout of the weekend’s college bowl games in millions of homes. They did not disclose the terms.
The deal between the News Corporation and Time Warner caps weeks of sparring over the price that the cable company — and by extension its customers — should pay to watch Fox, ahead of an end-of-the-year contract expiration.
Analysts had expected that the deal would set a new high water mark for local TV stations that want sizable subscriber fees in exchange for so-called retransmission rights.
In tense negotiations with Time Warner Cable, Fox had demanded about a dollar a subscriber per month, far more than other stations have received. Time Warner Cable thought 30 cents was more reasonable, said people briefed on the talks who insisted on anonymity because the specifics of the talks were confidential.
Most likely, the two companies reached a compromise on the price, but both refused to comment Friday on the price.
“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, the president of News Corporation, in a statement.
Time Warner Cable’s president, Glenn Britt, called it a “reasonable deal.”
Meanwhile, customers of another major cable operator, Cablevision, were reminded Friday of what can happen when carriage talks break down. The Food Network and HGTV were unexpectedly removed from Cablevision’s lineups in New York, New Jersey and Connecticut shortly after the stroke of midnight, sending angry customers to their keyboards and phones to demand answers. Cable and satellite operators pay media firms for the right to carry channels, and those fees are reflected in customers’ bills.
Cable operators have historically resisted paying directly for the right to retransmit stations, but they have softened their stance in recent years, and some stations now receive between 10 cents and 40 cents a month per subscriber.
Fox asserted it deserved more. Rupert Murdoch, the News Corporation chairman, has positioned the company as a leader in “creating an economic template for the future.” Every cent represents millions of dollars in monthly revenue.
Analysts say the Fox station group’s aggressive stance could benefit other broadcasters going forward. In a report last month, analysts at UBS said the current dispute “is likely a harbinger of things to come as consumers have more alternatives to cable than ever before,” giving programmers more leverage in negotiations.
The big fee for Fox was part of a larger package of News Corporation channel renewals, which put cable channels like FX at similar risk of vanishing from Time Warner Cable systems, at least temporarily.
Fee negotiations are usually conducted discreetly, and deals are often completed close to their deadlines without viewers ever knowing. But Fox’s clash with Time Warner Cable broke out in public in November when the cable operator started a campaign to hold the line on programmer fee increases.
Some networks, it said on its Web site, “are trying to boost their bottom line by squeezing cable TV viewers like you — and threatening to pull the plug on popular shows if we don’t roll over.”
Networks say the fee increases are a matter of survival — or at least are necessary to keep producing quality programming.
Time Warner Cable representatives traveled to Los Angeles for talks with News Corporation early in the week. Under pressure from the government and from viewers to stave off a blackout, representatives for both sides met in a conference room on the Fox studio lot at 10 a.m. Pacific time on Thursday, and talks continued through Friday evening, said an executive briefed on the talks said who was not authorized to speak publicly.
The Fox negotiators had the option to pull the plug after the contract expired early Friday morning, but they decided to keep talking.
On the other side, the Food Network and HGTV outage affected about 3.1 million subscribers in the New York metropolitan area on Friday. The owner of the popular channels, Scripps Networks, says it deserves more cash for them. “The distribution rates Cablevision pays for Food and HGTV are among the lowest in the industry,” said Kenneth W. Lowe, the chief executive of Scripps Networks Interactive.
According to the research firm SNL Kagan, distributors pay about 8 cents on average for Food Network and 13 cents for HGTV. Scripps was believed to be asking for about triple that amount, or roughly 25 cents for Food and 40 cents for HGTV.
Cablevision took a hard line in its own statement Friday, saying that it had “no expectation of carrying” Scripps’ programming again, “given the dramatic changes in their approach to working with distributors to reach television viewers.”
Scripps’ contracts with Time Warner Cable also expired on Dec. 31, but those two companies continued talking into the new year without an interruption in programming.
