Time Warner to Carry Fox News in N.Y.

Settling a nasty and much publicized dispute, Time Warner Inc. agreed Wednesday to carry News Corp.’s fledgling Fox News Channel on its New York City system.

Some Time Warner executives were disappointed by the deal, which they viewed as a surprising giveaway to News Corp. Chairman Rupert Murdoch. Time Warner had been winning the battle in the courtroom, where News Corp. contended that Time Warner broke an agreement to carry Fox News on its New York system to protect its own news channel, CNN, from competition.

“We are very happy the dispute is behind us,” Murdoch said in a statement.

As part of the deal, Murdoch will gain access to 65% of the Time Warner systems across the country. Time Warner, the nation’s second-largest cable company, has 12.3 million cable subscribers.

News Corp. will pay Time Warner about $10 per subscriber to carry the channel, which is an unusually high amount. Most cable channels do not pay carriers at all.

In exchange for carrying Fox, Time Warner may gain access to Murdoch’s international satellite television systems for its cable channels. But some Time Warner sources questioned why the company had agreed to Fox’s demands when Time Warner had the upper hand. “It’s totally incomprehensible,” said one executive. “People are wondering what we were fighting for and why we didn’t settle this eight months ago if we were going to give Fox everything they wanted.”

One cable industry executive speculated that the settlement may have been tied to Murdoch’s retreat this spring from a plan to compete against cable with a new satellite television service. Another source said Time Warner did not relish a battle with New York Mayor Rudolph Giuliani because its cable franchise is up for renewal next year. The mayor has backed Murdoch in the fight.