Fox to Pay Its Affiliates for Interests in Kids Network

News Corp. and Saban Entertainment Inc. agreed Wednesday to pay Fox affiliates about $100 million for their interests in the Fox Children’s Network.

The cash could help stations better shoulder the increased bill for professional football rights that Fox expects them to share. Fox is seeking about $55 million a year from its affiliates to help cover a new NFL contract that will cost the network $4.4 billion over eight years.

The oversight committee of the children’s network will send the plan to 172 affiliates for approval.

The children’s network, a daily block of children’s programming, was created as a joint venture between Fox Broadcasting Co. and its affiliates in 1990. Fox takes a fee and covers its cost, dividing the profit among the affiliates. That profit was roughly $20 million in 1996, its first year in the black.

While the structure was designed to give affiliates an incentive to air the children’s block, the arrangement became complicated when Fox expanded the business into cable and international markets. To tap into a library and launch channels internationally, the network merged in 1996 with Saban, the producer of Fox Children’s Network’s flagship “Mighty Morphin Power Rangers.”

Through their 50-50 venture, Fox Kids Worldwide, the partners moved into cable last year with the $1.9-billion purchase of International Family Entertainment and Family Channel, which will be relaunched as Fox Family Channel this summer.

Affiliates worry that the new channel could cannibalize viewership of Fox Children’s Network. Already, competition from Nickelodeon, Disney Channel, WB and a reinvigorated ABC Saturday morning lineup has eaten into the block’s ratings, challenging its one-time dominance.

Fox affiliates were also concerned with how to pay for the rising bill for sports. But the affiliates, which are now giving Fox $30 million a year toward football in the form of advertising time and cash, consider a contribution of about $40 million more appropriate, since it reflects the 33% increase in rights fees.

While ABC and CBS wrestle with their affiliates over sharing the costs of an expensive new contract to televise NFL games, Fox seems to have escaped the rancor.

Unlike other networks, Fox does not compensate its affiliates for airing network programming. And most of its affiliates were financially struggling UHF stations before Fox put them on the map.