Marketing

Cablevision-Fox Fight Goes Down to Wire

10/18/2010 12:01 AM Eastern

Cablevision Systems and
Fox Networks turned up the heat
in their ongoing carriage dispute
last week, with both sides
hurling barbs and giving strong
indications that an agreement
wouldn’t be reached by the Oct.
15 deadline.

Cablevision’s carriage agreement
with Fox — involving
broadcast stations WNYW and
WWOR-TV in New York and
WTXF in Philadelphia, as well as
cable channels Nat Geo Wild, Fox
Deportes and Fox Business Network
— were set to expire at midnight
on Oct. 15. As of press time,
no agreement had been reached.

Both sides stepped up the rhetoric
as talks moved closer to the
wire. Last Monday, Fox was the
first to indicate that perhaps a
deal was not forthcoming, stating
in a memo to the Federal Communications
Commission that it
had made a proposal to Cablevision
on Oct. 5 and had not received
a response. That answer,
in a letter from Cablevision executive
vice president of programming
Mac Budill to Fox president
of affi liate sales Michael Hopkins,
came a few hours later on Oct. 11.
Budill wrote that the Fox proposal
was exorbitantly high.

Cablevision executive vice
president of communications
Charles Schueler took it a step
further, saying in a statement released
to the media later on Oct.
11 that Fox was demanding a twofold
increase in the amount Cablevision
pays annually for its
networks, to $150 million from
$70 million.

Fox countered that Cablevision is paying considerably more
for two of its sister channels —
about $124 million annually for
sports channels MSG and MSG
Plus, now part of a separate company,
Madison Square Garden
— even though the Fox channels
have signifi cantly higher ratings.

In a research note, Miller Tabak
media analyst David Joyce
estimated that Fox is asking for
retransmission consent fees of
about $1 per month per subscriber
for the two Fox broadcast channels
— up from 25 cents — and 75
cents for WWOR (a MyNetwork
TV station), up from an estimated
10 cents. Joyce also estimated
that Fox is requesting 25 cents
for Fox Deportes (up from 5 cents
currently); 40 cents for Nat Geo
Wild (compared to its current 8
cents); and 50 cents for Fox Business
(up from 10 cents currently).

Both sides have made big
splashes in the New York media,
taking out ads in print, television
and radio to get their side of the
story out. But despite the rhetoric
and the chest thumping, the
dispute boils down to a simple
issue — Fox wants more money
for its channels, and Cablevision
doesn’t want to pay it.

Most analysts believe that Cablevision
will eventually pay —
the MSO itself has said that it has
offered to pay Fox a sum for the
broadcast stations that is equal to
or better than what it pays other
broadcasters.

A lengthy impasse, though,
could affect business for both.
Fox has some leverage in the negotiations
in that its broadcast
stations carry National Football
League games — including
the hometown New York Giants.
And if the impasse lasts deeper
into the month, Cablevision subscribers
would risk missing Major
League Baseball’s World Series,
which starts on Oct. 27 and could
potentially involve the New York
Yankees.

Bethpage, N.Y.-based Cablevision
has about 3 million subscribers
in New York, Connecticut and
New Jersey.

Both sides are digging in their
heels — Fox has peppered the
New York media landscape with
ads warning Cablevision subscribers
“Three Strikes You’re
Out,” referencing the MSO’s earlier
carriage disputes with Scripps Networks and the ABC broadcast
network. Cablevision has countered
with ads that chastise Fox
parent News Corp. for negotiating
by taking programming away.

Cablevision also has enlisted
the help of local legislators from
Long Island, N.Y. — U.S. Reps.
Peter King (R-Seaford) and Steve
Israel (D-Huntington), both of
whom called for the parties to
submit to independent third-party
binding arbitration in the dispute.

Some analysts are expecting
that the channels will leave Cablevision
space at least for a little
while. And history would prove
them right — Scripps’ HGTV and
Food Networks were off the systems
for about three weeks earlier
this year and ABC returned after
several hours. Those deals were resolved
at rates that many observers
believed were palatable to both
companies.

Fox has also been embroiled
in a dispute with Dish Network
— it pulled its FX, National Geographic
Channel and 19 regional
sports networks from the satellite-
TV provider on Oct. 1. As of
press time, Dish’s 14.3 million
subscribers were still without
the channels.

Collins Stewart media analyst
Tom Eagan believes that in the
Cablevision battle, the advantage
may be with Fox.

In a research note Eagan wrote
that Fox has more sports programming
at stake — baseball’s
National League Championship
Series, the World Series and NFL
football — and that could force
some viewers to seek other options
in a drawn-out dispute.

“We believe there is a higher
likelihood that Cablevision subs
may tire of this and churn to alternative
providers,” Eagan wrote.

November