January 25, 2023
Fallout: Time Warner, Fox Deal May Set Benchmark For Retrans Disputes
- by Wayne Friedman , January 4, 2010
The big carriage deal Time Warner Cable made with News Corp. over the New Year's Day holiday will have repercussions for other big media players and consumers.
Some analysts believe it will set a benchmark for TV station groups to push for more lucrative retransmission content deals. In the long term, this could lead to more a la carte programming packages for consumers, possibly at higher prices.
Neither Time Warner Cable or News Corp will reveal financial details.
According to executives, News Corp. wanted $1 a cable subscriber per month; Time Warner, around 20 to 25 cents a subscriber. Many analysts believe the deal was settled at the halfway point: around 50 cents to 60 cents a subscriber.
Of Time Warner's 14 million homes, 4.6 million are covered by Fox-owned stations, with another 1.8 million coming from Bright House Networks cable systems, which were a part of the deal. Analysts say this could bring $38 million a year to Fox.
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But even then it's hard to determine what part of this sum is attributable to Fox TV stations, and what goes to other Fox entities.
"You would want to know how the money was spread around to some of the cable channels," says Larry Gerbrandt, longtime entertainment and media industry analyst and principal of Media Valuation Partners.
Rich Greenfield, media analyst for Pali Research, writing on his blog, says: "Our best guess is that Fox was willing to reduce its demands for cable network distribution and sub fee growth."
In particular, Gerbrandt wonders what News Corp.'s growing cable channel FX receives from this deal. He notes that in the mid-1990s, as part of many first retransmission deals for media companies, new cable networks were launched, such as News Corp.'s FX, Walt Disney's ESPN2, and NBC Universal's America's Talking, the former incarnation of MSNBC.
He notes that now, big media companies are "double dipping." The first retransmission deals focused on money to support those new channels. Now big media companies want this, plus new money for their TV stations.
Analysts say such demands could turn into some major problems for media companies and other cable channels, especially if this drives up the cost to consumers. That would encourage federal agencies to possibly make drastic changes to the business.
"They are playing with fire and dynamite; it could lead to a la carte programming," says Gerbrandt. "You could see dozens of channels disappear."
In another carriage dispute battle between cable operator and cable network, Cablevision Systems removed Scripps Networks' HGTV and Food Network over the weekend.
Adds Pali's Greenfield: "Programming costs will continue to be biased upwards for cable operators, such as [Time Warner Cable] (in high-single digits), through a combination of cable network renewals and first-time broadcast retransmission fees."
5 comments about "Fallout: Time Warner, Fox Deal May Set Benchmark For Retrans Disputes".
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Cable companies should NEVER pay broadcasters a dime!
Why, you ask?
Because of 4 simple, powerful reasons:
1. Broadcast programming is available over the air for FREE; cable customers should not be charged for it when it is freely available to others.
2. Cable delivers broadcast programming with a better signal over a larger area than most stations would otherwise have; so there is a strong argument that broadcasters should pay the cable companies.
3. Other "cable" networks give the cable companies 2-3 minutes of avails per hour to make back programming fees. If broadcasters want fees/payments, they must give the cable companies the same commercial avails to sell.
4. Broadcasters take money away from cable copmanies by selling local ads that run on the cable systems. If broadcasters want fees FROM cable, they should stop selling ad time AGAINST cable.
If broadcasters want to be cable networks, then fine. (See rules above.) Hey, the "cable" model doesn't seem to be broken.
IF I were to once again Subscribe to Cable, it would be because I could go A-La-Carte. I would pick the Local Channels, plus ESPN and its Sub-Channels, Speed, TNT and Versus and THAT'S IT. I have no need for any of the other channels. (As it stands now whenever I want to see a Sporting event that's not on the Local Channels I walk to a Sports Pub that's about 1/2 mile from my house.)
Ed, while much better minds than yours or mine could debate this for years, the basic problem lies in the fact that over-the-air broadcasting was founded on an ad-supported revenue model (free to you and me) while cable was built on a subscriber fee model (obviously not so free) and never meant for anything more than re-transmitting local broadcast signals.
In those early days, before cable networks or "cable advertising", it was thought the two models would forever exist in a "Never the twain shall meet" environment.
Today though, you have cable networks and local cable operators (LCO's) "double-dipping" if you will by not only charging subscriber fees but selling advertising too.
This begs the question: If cable nets and LCO's can sell advertising, why can't broadcasters charge subscriber fees? After all, a broadcaster is simply another content provider to an LCO (although one that provides his most highly rated programming); why shouldn't the broadcaster be compensated like any other content provider? How the LCO chooses to deal with the per-subscriber fee it may pay to acquire a broadcaster's content (absorb it or pass it on to you), is between you and your LCO, not between you and the broadcaster. If you don't like what your LCO charges, cancel your subscription!
And just for the record, your call for broadcasters to give-up ad time to LCO's is nonsensical; it isn't even universally accepted practice among cable nets.
In fact the first-ever cable net (HBO) still does not sell advertising...nor do a number of cable networks.
You are right about one thing though; broadcast content is free...but that doesn't give another commercial entity the right to profit from it.
Stations/networks need cable companies to deliver programs to the audience. Cable companies need something to deliver. Both sides want more money where a wash takes place. It appears that all this boils down to an inflationary system where the consumer gets washed down.
Dave, I appreciate your perspective but you're clearly missing an important point. HBO is not a basic cable network but a pay service; it doesn't sell network ads either because it is a non-ad-supported network. ALL ad-supported cable networks, from the very beginning, including the two very first (CNN & ESPN) do indeed offer local avails to MSOs.
Also, I never said that broadcasters could not charge fees, I merely observed that if they claim the right to charge fees by making ratings comparisons to cable networks, they should expect to live up to the same expectations that the cable networks already do.
Further, we cannot cancel the broadcast fees as consumers the local broadcasters force the deal on the entire number of subscribers. Why not let the broadcasters be a la carte? If we want HBO or Showtime, we can pay extra. If we want to get FOX or ABC at a price, we can choose to pay extra. But if we want it for free, we should have that option as well.