Dun Dun Dunnhhhhh. Every year it seems like we go through this, and it always involves Time Warner Cable. Last year, it was Viacom and Time Warner Cable, with Viacom threatening to pull SpongeBob (and the rest of its channels). Just like this year, there was a long lead-up, crawls at the bottom of Viacom channels promoting that the channels would be pulled, and Viacom execs saying they were prepared to pull their programming and that things didn’t look like they would get resolved before midnight. But they did get resolved before midnight.
What’s at stake?
Fox will pull its broadcast network off of Time Warner Cable in any of the markets where Fox owns and operates the local FOX affiliate if a deal doesn’t get done (less than 4 million of the approximately 13 million TWC homes). Additionally, other programming from Fox (FX, Fox News Channel, etc) will be pulled off Time Warner Cable for all subscribers in all markets if a deal isn’t done.
What Fox Wants
Fox reportedly wants $1 per subscriber per month for the FOX broadcast network. That’s on par for what networks like TNT receives and much less than what ESPN (~$4/mo.) gets. Of course those networks give up some commercial time back to the local cable networks. But those networks aren’t watched in prime-time or for NFL football as much as FOX is.
What Time Warner Cable Wants to Pay
Time Warner Cable reportedly wants to pay around ~$.30/mo/subscriber
This isn’t an easy call, but in the end my take is that Time Warner Cable is greedier, and by a fair clip. It charges us much more for the content than what it pays for it. But, it cost a lot of money to put down all the cable. The broadcast networks (in this case, FOX) are in self preservation mode. Their content has traditionally been free over the air, but the TV landscape has changed a lot in the last 20 years and the broadcast networks want to have the same dual revenue stream that cable channels have. From my perspective, for the last 20 years the major broadcast networks have been the biggest channels (ratings-wise) on any of the cable/satellite/etc. offerings.
But, It’s Not Just FOX
But, the problem is, it’s not just FOX. CBS will want the same deal. Then ABC and ultimately NBC (though this is trickier since Comcast is buying a controlling stake in NBC Universal). If TWC gives FOX $1/mo/subscriber, that’s $15 13 million a month (edit: actually much less, at least initially since it would only be for the ~4 million customers in markets where FOX owns and operates the local affiliates).. But if that winds up being the standard and ultimately applies to all affiliates, and ABC, FOX, CBS and NBC each get $1 a month, that’s over $60 50 million a month and over $700 600 million a year. It’s a lot for TWC to contemplate after years of “why buy the cow when we can get the milk for free.”
some comments about this back of the envelope shoddy round number math since TWC doesn’t have 15 million customers and currently less than 1/3rd of TWC’s customers are in markets owned and operated by Fox. But ultimately if Fox O&O are getting $1, the non owned and operated will want that too, and so it still adds up to it ultimately being a bigger deal than just Fox.
The days of the free ride are going to end, and if I’m CBS or FOX or ABC, and I’m asking for ~1/4th of what ESPN it doesn’t seem to greedy. But if I’m TWC, it still adds up to a LOT of money. Ultimately as I’ve been writing for two years, the way the pie of our monthly cable bills is sliced needs to be redistributed. But that is extremely complicated with a lot of players involved. Even if the cable companies could easily figure this out, your bills would go up a tiny bit anyway. But they can’t easily figure it out, and the easiest way for them to deal will be to pass the cost back on to us.
Senator John Kerry is asking that the FCC step in to make sure FOX stays on TWC should a deal not get done. I’m not in favor of that as it seems to put FOX at an unfair advantage in terms of negotiating. Though in fairness, I’m not a TWC customer so I won’t be impacted. If I was, I would probably have put in the calls to DirecTV a couple of weeks ago just to be safe and make sure I’d get the BCS Bowl games.
Best Way To Stay Up-To-Date
Broadcasting & Cable has the best coverage of this stuff and they are far less likely to take the rest of the day off than I am. Though I feel bad that B&C folks like Melissa Grego and John Eggerton will wind up working until after the clock strikes midnight on the east coast, if a deal gets done, I’d expect it to be very close to midnight. But there could be several updates between now and then.