Fox News Net Narrows Gap with CNN

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After pulling in front in the all-news network ratings battle, Fox News Channel has narrowed Cable News Network's lead in the distribution war.

FNC recently surpassed the 60 million subscriber mark, network executives said last week. And some MSOs, including Cox Communications Inc. and Comcast Corp., are rolling out the channel sooner than was originally scheduled.

Executive vice president Jack Abernethy said FNC expects to count some 63 million subscribers this summer, and the network is on pace to surpass the 70 million plateau by 2003.

FX, News Corp.'s general-entertainment cable network, also crossed the 60 million subscriber mark in February, according to Nielsen Media Research estimates.

When FNC debuted in 1996, CNN had 60 million subscribers-the size of the Fox News offering today. According to Nielsen, CNN now has 80.7 million subscribers. MSNBC, which also launched five years ago, counts 63.6 million homes.

Beginning this week, Comcast plans to launch FNC in Philadelphia-the nation's fourth-largest market-and in Toms River, N.J. The MSO also will soon offer the network in Indianapolis and Montgomery County, Md., Abernethy said.

The new Comcast rollouts will give FNC 1.3 million additional subscribers.

For its part, Cox plans to launch FNC to 600,000 Phoenix subscribers in March and 250,000 New Orleans subscribers during June.

Driven by the success of its primetime hit The O'Reilly Factor, its election coverage and other programs, FNC has emerged over the past year as a serious threat to CNN. Since October, it has beaten or tied CNN in primetime and total-day ratings, topping its competitor in both categories during February.

When FNC bowed in 1996, the network raised cable-industry eyebrows-and revenue bases-not for its programming, but for its offer to pay cable operators $10 per subscriber in launch fees.

What's notable about FNC's recent expansion is that it's being fueled not just by contract negotiations, but by subscriber requests for the channel, according to officials at FNC and some cable systems.

Cox spokeswoman Ellen East said subscriber requests for the channel played a role in the Phoenix launch.

In that market, Cox faces stiff competition from Qwest Communications International Inc., which carries FNC. But East said heat from the overbuilder wasn't the driving force behind the Cox Phoenix launch.

"Five years ago, when we started this thing, everybody was laughing about the Fox News Channel," said Abernethy. "Now, these people are holding rallies for us.

"Most systems have accelerated and launched us ahead of schedule due to viewer demand," Abernethy added. But he conceded that there have been some "pockets of resistance."

One of the network's distribution holes is Cox's Las Vegas system. Local viewers and Republican officials have reportedly lobbied for the channel, and the Las Vegas Review-Journal
backed the service in an editorial earlier this month, which reminded viewers that they can get FNC on satellite if Cox doesn't launch it.

"If state Republicans can convince Cox officials to add Fox News to its programming lineup, fine. But local residents do have other options," the newspaper wrote.

Officials at the Las Vegas system said they've been in talks with FNC for more than a year, but that the companies haven't agreed on a rate. "We're not going to bring Fox News on until it makes good business sense for us and our subscribers," spokeswoman Stephanie Stallworth said.

The system has received some requests for the channel, but Stallworth said they have come form a "vocal minority."

FNC reached operational break-even on its investment in the channel during the fourth quarter, Abernethy said. That's one year sooner than FNC executives had predicted in 1996.

Although a big chunk of FNC's startup costs went to paying cable operators an average of $10 per subscriber, Abernethy said those fees are being amortized over the life of the 10-year carriage deals.

FNC engaged in a bitter fight against Time Warner Cable in 1996, after the MSO refused to carry the channel. Even New York City Mayor Rudolph Giuliani jumped into the fray, attempting to force the MSO to run the channel on a public-access channel controlled by the city.

Time Warner and FNC later reached a truce, and the MSO is now FNC's second-largest distributor, offering the network to 12.3 million subscribers. AT&T is the network's biggest affiliate, with 15.2 million subscribers.

Other key distributors include DirecTV Inc. (8.2 million subscribers), Charter Communications Inc. (4.7 million), Comcast (3.8 million), Cox (3.6 million), Adelphia Communications Corp. (3.6 million), EchoStar Communications Corp.'s Dish Network (3.5 million) and Cablevision Systems Corp. (2.3 million).

Looking ahead, Fox executives hope to launch a business-news channel, though Abernethy said there's no set timeline for creating a would-be CNBC competitor.

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