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
Who's Greedier?
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.
What's Next?
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.
Well like i said it wont bother me since i dont watch any of that garbage on FOX.
I get Time Warner, and honestly, I would look for a way to get out of my contract because these are some of the essential channels that I watch, and pay Time Warner for the ability to watch. If I can’t do that, then I have a problem with my cable company.
Wasn’t it last year that Viacom and Time Warner had a dispute in the same sense, and they worked out a deal a couple hours before midnight? If true, then precedent gives me hope.
Same here. It wouldn’t bother me one bit if FOX disappeared from my cable channel lineup.
Here in Orlando they have a local Attorney working to keep Fox from pulling the signal, but I’m with a lot of local people here who are calling for a boycott of FOX channels. Here in this financial time they want to increase the bills of millions of people. Fox is just plain GREEDY. And with how they are changing their program schedule they don’t really care about the viewing public.
since when do you sign a contract for cable? I thought it was month to month just pay your bill.
What a poorly written article. You make no mention of the fact how long retransmission fees have been part of the equation. Nor do you the past contracts w/ Fox and TW in regards to that.
No mention of the difference between TW just taking Fox on “must carry” via paying retransmission fees.
Also, FNC will not go dark on TW. That is a totally separate agreement. The cable channels which will be effected (which don’t have a deal done are: FX, Speed, Fuel TV and 10 regional sports networks.
You could also point out that of the 14 million Time Warner homes, Fox O/O’s effected will only be around 3.9 million homes.
Some people get discounted rates for a long term contract (or things like pay channels for free or at a discount if they sign a long term contract).
Personally I say drop Fox, as I don’t really watch anything on FOX anymore, and since I easily get better reaction over the airwaves then through cable I can still get HD of the broadcast channel (if there was soemthing on FOX I wanted).
The Cable channels are another issues (though really besides a few nascar races I no longer watch any FX shows, can’t stand FOX news, and again besides Nascar don’t really watch FX sports).
If TWC gives FOX $1/mo/subscriber, that’s $15 million a month. If it gives ABC, FOX, CBS and NBC each $1 a month, that’s $60 million a month and over $700 million a year.
Is that really how it will work, or will they only pay for subscribers in markets with O&Os? Now, TWC owns NYC and LA, and all the networks have O&Os in those two markets, but it’s still less than the 15 mil total subscribers TWC has. (And i thought they were closer to 13 mil?) For NY and LA, using a generous estimate (since there are two interconnects in NY, one called Time Warner, which has less than 50% of the NY interconnect, and the LA interconnect is called Adlink, but I’ll just use that whole number anyway) TWC may have as much as 6.5 mil subscribers. Dallas adds another 780k. Tampa and Orlando 1 mil each (Brighthouse, which is part of the deal). That’s it in the top 20, and of them only Fox owns a station in each one. ABC doesn’t have anything in Dallas-Fort Worth and none of the other three have stations in Tampa or Orlando.
don’t worry about the precision, it still adds up to way more than TWC is going to want to pay. And if FOX O&O get that, you don’t think the independently owned FOX affiliates will ultimately want the same thing?
Joshua, please provide a link to your wonderfully written article so I can link to it. Thanks! I linked to B&C — they have the best stuff (in my opinion) on the subject. I was not looking to be comprehensive.
Yes, but I’m not sure if they’ll have as much leverage. How much was Sinclair able to get? Or did they end up with nothing?
Robert, Variety has a much more comprehensive story on the matter.
If you want other good information search: FCC retransmission fee must carry. Look how long cable operators have been paying for this. The way people are reacting they act like its something new.
Also for perspecitive on this read this article:
http://www.multichannel.com/article/127288-Time_Warner_Cuts_News_Corp_Deal.php
I agree that it only being less 1/3rd of TWC’s customer is less leverage than if it were all of them, and I’m not sure the threat of FX, Fox Sports, and Fox News Channel, etc impacting all of TWC’s subscribers adds much additional leverage. From that perspective SpongeBob was probably better leverage for Viacom…
If TNT is getting almost $1, you can count on the cable companies having to pay the broadcast networks that much at some point, though it’s going to take years to play out fully.
My main point (which anyone is welcome to disagree with) is that either way, if I’m TWC I think “If I give in and give FOX what they’re asking for, it’s going to cost me a LOT more than just the FOX O&O down the road.”
Joshua, a lot of people can’t access Variety at this point, but they can access sister publication Broadcasting & Cable (and other sister publication Multichannel News, too!).
What’s “new” is that the broadcasters now want to move away from “must carry” and want the legislation around that changed.
One way or the other the broadcasters will move to the dual revenue stream. How it plays out will be a story for a long time to come.
How do you know if you are a TWC customer?? Because I watch shows on FOX…
Mark D., who do you get your cable bill from?
How dramatic!
For viewers of FOX on Time Warner Cable, will the signal cut out the moment the clock strikes midnight on FOX’s ‘Billboard’s New Year’s Eve Live’ which runs 11pm-12:30am.
I cannot wait to see the half-hourlies on the special in order to see the immediate viewer impact of the FOX pull from TWC. Most of those blackscreen viewers will probably change channels at midnight to ABC’s ‘Dick Clark’s New Year’s Rockin’ Eve With Ryan Seacrest 2010′ which should see a nice little New Year’s leap in the half-hourlies.
Call me crazy but I’m kind of looking forward to this. I want to see what happens and I think it’ll make a cool story sometime in the future.
It’s not like anything new will be on Fox for the next couple weeks anyway and even if it goes longer there’s always their website, iTunes or Hulu.
I hope TW has fun with it. If it were me I’d get my copy of photoshop, cut out a picture of Rupert Murdoch’s head and then fire up Google’s image search and go to town.
would I miss fox? Yes. Do I have Time Warner? No. Is Fox greedy? Yes. Is Time Warner unreasonable? No.
I have recently developed a vendetta against Fox, especially since they decided to kick NBC while it’s down.
What really needs to happen is subscribers need to be able to choose which channels they want to pay for. This will settle all the problems in distribution.
It’s not like anything new will be on Fox for the next couple weeks anyway
Yeah, nothing new, except for all that NFL, the most watched programs on TV…