It's that time of year again; cable programmers and broadcasters contracts are about to expire, which means a messy battle fought with expensive ad campaigns. This year it's News Corp's deal to transmit its cable networks through Time Warner Cable that's due. It's hard to turn on the TV or open a newspaper without catching sight of the fight they're waging in the court of public opinion. If they can't strike a deal by the moment the ball starts to drop in Times Square on New Year's Eve, then you can forget about watching a Sugar Bowl game on Time Warner Cable on New Year's Day.
News Corp is demanding Time Warner pay subscriber fees for its Fox broadcast stations, the way they're compensated for their cable networks. It's no surprise why Rupert Murdoch's media giant wants subscription fees: broadcast ad revenues are on the decline and the dual-revenue cable model has proven a real winner. Cable is consistently the winner in the media space. Plus, Fox's hit shows like "American Idol" should make it worth paying for.
The question is, how much is it worth? News Corp is demanding $1 per subscriber, per month, which Time Warner Cable is describing as "egregious, and a 300% increase." Sources tell me that this is far more than CBS got when it negotiated retransmission fees for its broadcast network. Dudley says TWC is willing to pay for content, even if that content is, like broadcast networks, available free over-the air and on Hulu.com. He just takes issue with the price.
David Joyce, media analyst for Miller Tabak predicts that the two adversaries will eventually make a deal. He expects News Corp to end up getting about 60 cents per subscriber per month. He points out that while this is more than other broadcast networks get, Fox does have high ratings.
Here's the thing: with the end of analog TV and the transition to an all digital world, most Americans pay for their "free over the air" TV, they just pay for it as part of a larger cable bundle. When the cable programmers are negotiating to get paid for their broadcast nets -- the broadcast nets' parents all also own cable channels -- they're simply asking to get paid more for the bundle of channels they deliver to cable or satellite providers. Now people are talking about turning broadcast nets into basic cable channels. But maybe that's all semantics. Content creators want to get paid more and content distributors are eventually going to have to pass along these costs to consumers. Cable or broadcast -- Time Warner Cable is paying one chunk of change each month for all Fox channels. News Corp just wants that check to be larger.
What about Hulu? If Time Warner Cable subscribers lose Fox, they can probably find their favorite show on Hulu, which means they wouldn't need to pay their cable bill. Wouldn't that hurt Fox's leverage? Will this kind of heated negotiation, and the push for subscriber fees for all TV content result in less content being made available free online? Quite possibly. Or maybe we'll just move to a world where everything is behind a firewall for cable, satellite or Telco TV subscribers.
As for this deal, the clock is ticking.
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