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Fox News Pitching Now, Hiking Later

4/17/2005 8:00 PM Eastern

If you haven’t seen the presentation yet, don’t worry — Fox News Channel plans to get to you.

The top-rated cable news network is in the process of making the rounds to local systems and regional MSO offices with a presentation titled “Fox News Channel: America’s Most Valuable Cable Network.”

As of mid April, Tim Carry, the channel’s senior vice president of affiliate relations, said he and members of his team had made presentations to about 15% of systems.

“We need an evaluation of what we are and what operators think we are,” he said. “Our goal is to engage operators in productive discussions about what we’ve become over the past 10 years, since our launch in 1996. We want to see how value is perceived in the marketplace, before we go see the big MSOs.”

RATE RISE TO COME

Carry said such presentations will continue over the next six months or so. Then, the meetings carriers aren’t likely looking forward to — negotiations for rate increases before the expiration of Fox News’s contracts in October 2006 — will occur late in the year.

“It’s in the near-term, around six months,” Carry said of the upcoming negotiating period. “We’ll sit down and really negotiate as the deal expiration looms.”

Sources peg Fox News’s monthly per-customer license fee at 23 cents to 25 cents — and operators anticipate a possible doubling of that rate.

Carry declined to comment about pricing or rate increases, other than to say: “We’ve never really re-evaluated our brand asset worth over the 10 years. This is not a nickel-or-dime thing. We want to assess how our value has changed since 1996.”

Not a nickel or a dime — but is it a quarter? That’s what many operators think.

“It’s going to be about 50 cents,” an executive with a small cable operator said. “I’ll try to shave some off, but that’s what I’m forecasting for the next few years. Better to be conservative with your costs of goods than naïve.”

DELIVERING ON PROMISE

Before the actual negotiations begin, first comes the presentation. A highlighted-text copy was shown to Multichannel News, accenting the phrases “promise delivered” and “value gained.”

The presentation is heavy on ratings achievements, inroads against broadcast news, brand-equity attributes and ad-sales value.

“The ratings gains have been obvious. We’re one of the top-rated networks in all of cable,” Carry said. “But it’s our brand resonance that really connects with people. In some ways, we’re more than just a news network, we’re a way of life.

“Our viewers are tenacious, their eyes are on the network. Let’s put it this way: They’re not cooking dinner while they’re watching us and they don’t switch to other networks quickly.”

To that end, the presentation, citing Nielsen Media Research data, pegs average primetime minutes viewed at 46 minutes for Fox News, versus 37 and 30 for Cable News Network and MSNBC, respectively.

It also notes that over the course of a 30-minute period, MSNBC and CNN viewers switch channels an average of 1.8 and 1.3 times, compared with 1.1 for Fox News.

Kelvin Fee, senior vice president of Wide Open West in Chicago, said: “The presentation didn’t really tell me anything I didn’t already know. Their ratings have been very strong for the past few years. What was interesting was to see the comparisons with the other channels.”

In primetime during 2004, Fox News’s presentation points out that it held a 49% share of cable news audience, versus 23% for CNN, 13% for MSNBC, 8% for Headline News and 7% for CNBC.

The total-day share totals for 2004 were, 44% for Fox News, 22% for CNN, 13% for MSNBC, 12% for Headline News and 9% for CNBC.

“Fox News has more news viewers than the other two [CNN and MSNBC] put together,” It’s a must-have channel,” said Jedd Palmer, principal in Denver-based Buss-Palmer Consulting.

Palmer said that message came through loud and clear with consumer research when he was working to help establish a programming lineup for U.S. Digital Television Inc., the over-the-air subscription service. “They wanted to have Fox News right next to Discovery, HBO and ESPN,” he said.

BRAND RESONANCE

The presentation also highlights a brand resonance study conducted by Knowledge Networks in which Fox News earned higher marks than its competitors relative to attributes like loyalty, attachment, community and engagement.

Additionally, it speaks to about how 25% of Fox News audience is made up of “influentials,” people who are “active, involved leaders, who tell others how to vote, where to eat and what to buy.”

Local ad sales are another valuable component, according to the presentation. Carry said Fox News is insertable in systems reaching nearly 65 million homes, with many of the additions taking place between 2001 and 2003.

“The success we’re having nationally is translatable down to local level,” he said. The presentation indicates that Fox News helps generate $700 million a year in local ad-sales revenue.

“[Fox News’s] local ad-sales value is only exceeded by ESPN,” Palmer said. “With its long length of tune-in, Fox News Channel is an ideal advertising vehicle for local businesses to use.”

WOW’s Fee agrees that Fox News is an effective vehicle for local sponsors, but it falls short of sports. “It’s packaged together with the other news channels. With ESPN and the regional sports networks, you can really do a little more,” he said.

Looking to the negotiations on the horizon, distributors are bracing themselves.

Dave Beasley, vice president of marketing at CMA Cablevision, which reaches around 65,000 subscribers in the Dallas area, laments that Fox doesn’t do “big comprehensive deals.” Retransmission consent is handled distinctly, and his current talks with Fox Cable Networks Group are for FX and the regional sports networks. “Then I’m going to get hit with Fox News. For whatever reason, they negotiate separately.”

Beasley said that while he’ll be “sheltered” by the National Cable Television Cooperative agreement to some extent, he expects terms to be “very applicable” with CNN, with whom CMA did a renewal deal last year. “Fox News will argue that they’ve surpassed them in viewers.”

Sources place CNN’s monthly rate card at 41 cents to 44 cents per customer.

WOW is also girding for the meeting that lies ahead.

“Let’s be honest,” said WOW’s Fee. “Fox News got carriage by paying $10 per subscriber, but they’ve really delivered since then.

“We’re going to have to pass on the increases to consumers and that’s tough in a competitive situation. Let’s just hope they don’t try to get it all back.”

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