Buoyed by a strong quarter that was in part fueled by higher affiliate fees, Fox News Channel parent News Corp. said carriage agreements for the popular news channel begin to roll off at the end of the year and hinted that renewal agreements could cost distributors.
Fox News led a strong fiscal third quarter for News Corp., with operating income at the channel up 31%. The news channel was the primary driver for a 38% gain in operating income for News Corp.'s cable network division. Overall advertising sales were up 19% and affiliate fee revenue climbed 16% in the quarter.
Fox News recently completed the bulk of its carriage renewal deals with distributors, a process that began about four years ago. Fox News, which had previously garnered fees as low as 25 cents per month per subscriber, received as much as 75 cents in its last round of deals, according to reports.
On a conference call with analysts to discuss fiscal third quarter results, News Corp. chief operating officer Chase Carey said that some Fox News deals roll off at the end of the year. He added that carriage agreements expire over a wide period of time and that the process would take several years to complete.
But he also hinted that distributors that may have been hoping for a break in the latest round of deals could be in for a surprise. Fox News won't be cheap.
"I think Fox News network and the power and importance of it is, maybe with ESPN, second to none," Carey said. "It is a channel that has built an enormous following, an enormous audience and is tremendously important to a major segment of the country. And heading into a complicated political arena that probably gets more complicated between now and 2012, I think the importance of that channel and the value of that channel probably has never been higher. What we are going to do is get fair value for that channel. We will pursue that appropriately and aggressively."
On the advertising front, chairman and CEO Rupert Murdoch said that there appears to be room for growth.
"There is a lot of money out there on the boards," Murdoch said on the conference call. "Our advertising people are very optimistic about the upfront and the network."
Murdoch said that while the broadcast audience is shrinking - he claimed Fox Broadcasting is shrinking less that the competition - that bodes well for the cable networks.
"That money is finding its way across into the cable networks," Murdoch said.