Fox News Triples Its Pleasure

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Trying to set a template for deal negotiations over the next few years, Fox News Channel has signed a lucrative contract renewal with Cablevision Systems Corp.

Terms were not publicly disclosed, but parties familiar with the extension said the Bethpage, N.Y.-based cable operator will pay Fox News a monthly per-subscriber fee “north of 75 cents” on average in a deal that lasts into the early part of the next decade.

Fox News also has a second renewal pact. Speaking to reporters after the News Corp. annual meeting in New York Friday, chief operating officer Peter Chernin said DirecTV Inc. has a deal with Fox News. News Corp., which owns Fox News, controls 38% of DirecTV. Chernin would not disclose pricing on either deal.

While the new license fee with Cablevision begins below that average in the early years of the contract, the rate escalates over its duration, according to those familiar with the pact. Eventually, Fox News would see its license fee triple from its current level, between 25 and 27 cents.

Fox sought a buck per sub. But the 75 cents figure is well above the 50 cents per month, per subscriber that a number of analysts expected.

For its part, CNN, which Fox News surpassed in the monthly ratings rankings early in 2002, receives a monthly per-subscriber fee of 45 to 55 cents, according to industry estimates.

With its other 10-year contracts beginning to roll off, Fox News — which started in 1996 — figures to be sitting on a mountain of new affiliate revenue as its extant contracts conclude over the next few years.

Another distributor whose Fox News deal will soon expire is the National Cable Television Cooperative, which represents independent cable operators with systems reaching some 14 million subscribers nationwide in programming-contract negotiations. NCTC senior vice president of programming Frank Hughes said the co-op is “working on an agreement” with Fox News, but declined to characterize the tenor of those conversations or whether the contract has expired.

Merrill Lynch & Co. media research analyst Jessica Reif Cohen estimated in a report last week that Fox News will receive about 65 cents per sub from Cablevision in the first two years, with “step-ups over the course of the six- to seven-year deal.”

Over the next four years, Merrill estimates Fox News will “generate over $2.4 billion in affiliate revenue from FY07 to FY10, over $450 million more than we currently project.”

Fox News will soon negotiate with the two largest cable operators, Time Warner Cable (fall 2007) and Comcast (fall 2008).

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