Broadcasters Battling for Cable Fees
By: Brian Stelter, The New York Times
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,” saidLeslie 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.
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