Friday, January 01, 2010

Fox vs. Time Warner Cable: A Portent of the Future?

Fox and Time Warner Cable played a game of "Chicken" with Time Warner's subscribers over the last few days, with Fox threatening to discontinue availability of its broadcast channel on Time Warner's systems unless TW pays $1 per subscriber per month in retransmission fees. TW has been said to have offered $0.25-0.35 per subscriber. Fox agreed to extend negotiations late last night so that TW subscribers could watch Fox's football games today.

Retransmission fees are nothing new--cable operators have been obligated by Federal law to pay them for years. Nor is brinkmanship, either by a programmer or cable operator, a new tactic. What is new, however, is for broadcast networks to demand their own retransmission fees. Cable operators are required by law to pay affiliates for retransmission rights, not the networks. The networks have historically played the game by allowing cable operators to pay reduced fees to carry their Owned & Operated (O&O) stations, or waived the fees altogether, if the cable operators carried their cable networks. (Cable operators pay separately for the rights to carry cable networks.)

The negotiations going on between Fox and Time Warner Cable centered on Fox's O&O stations; if Fox hadn't agreed to the extension, it would have knocked Fox stations off of Time Warner systems in New York City, Los Angeles, suburbs of Boston and other major markets. Fox would have had no right to withdraw its programming in TW markets where it doesn't own the local Fox affiliate. 

What Fox and the other broadcast networks are now saying is that they should be compensated in addition to what their affiliates get paid for retransmission. Here's an example: In San Francisco and Oakland, CA, the Fox affiliate, KTVU, is owned by Cox Broadcasting, not Fox. The local cable and IPTV operators are Comcast and AT&T respectively. Comcast and AT&T pay Cox for the right to retransmit KTVU's signal. Fox itself gets nothing. However, Fox also wants to get paid by Comcast and AT&T for its programming, in addition to whatever they pay to Cox.

The fight between Fox and Time Warner Cable is only the opening salvo in what promises to be a much longer war. Viewers should prepare for more brinkmanship as ABC, CBS and NBC pursue similar tactics.
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