With only hours to go until their current contract expires, News Corp. and Time Warner Cable Inc. were still trying to hammer out a new deal for the cable system operator to carry News Corp.'s Fox TV stations and several of its cable networks.
The likelihood of a new accord before today’s midnight deadline appeared to be quickly diminishing, and the possibility was increasing that millions of Time Warner subscribers could see Fox shows disappear from their TV screens.
On Wednesday, News Corp. President Chase Carey, in a memo to the company’s employees, said, “At this time, it looks like we will not reach an agreement and our channels may very well go off the air.”
A lot is on the line for both companies. Fox’s ratings are likely to fall and its advertising revenue decline without Time Warner Cable carrying its stations. Time Warner Cable, on the other hand, may face a backlash from subscribers threatening to disconnect and switch to satellite companies DirecTV and Dish Network, or phone company Verizon’s Fios.
Time Warner Cable has said it is willing to extend its current deal with Fox past the deadline and enter into binding arbitration to resolve their differences. Fox, however, has made it clear that it has no interest in either. In anticipation of its signals going dead, Fox has been quietly buying time on other media outlets in Time Warner Cable markets and plans to unleash a campaign defending its action and encouraging viewers to switch to satellite TV.
Besides Los Angeles, where Time Warner Cable has more than 1 million subscribers, other cities that would lose the Fox signals include New York, Dallas and Tampa, Fla. Locally, Time Warner Cable subscribers wouldn’t be able to get KTTV-TV Channel 11 and KCOP-TV Channel 13 as well as FX, Fox Sports West and Prime Ticket. Fox News Channel has a separate agreement with Time Warner Cable and is not affected by these negotiations.
Fox is asking Time Warner Cable to pay about $1 per subscriber each month to carry its local TV stations. Time Warner Cable has countered with an offer of about 30 cents per subscriber, people close to the talks said. Under the agreement about to expire, Time Warner Cable does not pay anything for so-called retransmission consent.
Sen. John F. Kerry (D-Mass.), chairman of the Senate Commerce Subcommittee on Communication, Technology and the Internet, who has become vocal on this matter, threatened to have the Federal Communications Commission intervene if Fox’s signal went off Time Warner Cable.
“If Fox believes that withdrawing programming . . . is its best negotiating tactic, then I would ask the FCC to intervene and mandate continued carriage,” Kerry said.
So far, the FCC has stayed on the sidelines, and historically has not involved itself in distribution disputes that often happen between cable system operators and program suppliers. A spokeswoman for FCC Chairman Julius Genachowski declined to comment on Kerry’s statement.
Kerry issued his statement after News Corp.'s Carey sent the senator a letter saying the company had no interest in extending the current contract or entering arbitration.
“We strongly believe this is an issue that needs to be settled at the bargaining table and that binding arbitration all too often looks to the past, not the future,” Carey wrote.
He added that Fox “needs to level the playing field” with other less-watched cable networks that are able to command big subscriber fees.
Although such battles between content producers and distributors are commonplace, the Time Warner Cable and Fox showdown has major ramifications for both the cable and broadcast industries.
In previous negotiations over retransmission consent, broadcasters such as Fox asked for more channel space on cable systems to launch new networks in lieu of fees. But with TV ad growth slowing, Fox and other broadcasters need new revenue streams and are counting on fees from cable and satellite operators to make up the difference.
In his memo to employees, Carey said Fox’s “requested compensation is about equal to what Time Warner Cable pays TNT, a network with a fraction of the ratings.”
A Time Warner Cable spokesman said Carey’s demands were “an extortion attempt necessitated by a poor advertising market and an innate desire to fatten his wallet at our customers’ expense.”
Although the rhetoric from the two companies was ratcheted up Wednesday, executives from both sides continue to negotiate in an effort to reach a new deal before today’s midnight deadline.
Other media companies are paying close attention. On Wednesday, Walt Disney Co., parent of the ABC broadcast network, swung its support behind Fox.
“Cable operators pay only about $25 a month for all of the programming on the basic and expanded basic tiers, and they sell this to consumers for some $60 to $70,” Disney said in a statement. “The fact that cable operators use these video offerings to sell even higher-margin broadband and phone services, blaming the programmers for monthly cable bill increases, is just plain wrong.”
ABC’s deal with Time Warner Cable for retransmission of its TV stations expires late next year. CBS already has a deal with Time Warner Cable, but if Fox strikes better terms, CBS has a “most favored nation” clause that could allow it to demand an equivalent deal.