Network
The companies agreed on a distribution deal Jan. 1, without disclosing the terms. Other broadcasters, such as CBS Corp., have also said they may seek payment for programming thats currently free. CBS has a deal with Comcast Corp., the largest U.S. cable operator, that ends next year, and already collects fees from Time Warner Cable and Dish Network Corp.
News Corp. sought as much as $1 a month per Time Warner Cable subscriber for rights to Fox, home of “The Simpsons” and “American Idol,” two people with knowledge of the matter had said. If other networks seek similar terms, cable operators may have to fork out as much as $5 billion a year — and would likely pass the cost on to subscribers, said Craig Moffett, an analyst at Sanford C. Bernstein in New York.
“The broadcast networks are really struggling to find a viable business model,” Moffett said. “Theyre looking at the cable networks that make money both on advertising and the money that the cable operators pay them and saying, We need a dual revenue stream to survive too.”
Time Warner Cable dropped 44 cents, or 1.1 percent, to $41.39 on Dec. 31 in New York Stock Exchange composite trading. News Corp., controlled by Rupert Murdoch, fell 22 cents to $13.69 on the Nasdaq Stock Market. Both companies are based in New York.
TV Rights
Broadcasters have said stations deserve to be compensated for supplying TVs most-watched shows, including “NCIS,” “Sunday Night Football” and “Desperate Housewives.” In the past, the networks traded those rights to gain distribution for new cable channels, like Walt Disney Co.s ESPN2, or higher fees for their existing channels.
CBS, owner of the most-watched TV network, is aiming for $250 million a year in so-called retransmission fees, Chief Executive Officer Leslie Moonves said at a UBS AG conference in New York in December. New York-based CBS plans to band together with its affiliates to pressure pay-TV systems, said Moonves, 60.
If Fox received $1 a month per pay-TV subscriber, and NBC, ABC and CBS sought the same, that would lead to an extra $5 billion a year in fees, Moffett said.
CBS probably gets about 50 cents a month for each pay-TV subscriber in some markets, said Robin Flynn, a consultant with SNL Kagan in Monterey, California. CBS started seeking payment after breaking from Viacom Inc.
Walt Disney CEO Robert Iger, whose Burbank, California- based company owns the ABC network, also said at the UBS conference that he also expects to begin retransmission talks concerning ABCs 10 stations next year. He declined to say what pay-TV distributors those negotiations are with.
Igers Take
Comcast, which is taking control of Fairfield, Connecticut- based General Electric Co.s NBC network, has said in regulatory filings that it also expects to pay retransmission fees, without detailing how much.
“It makes sense from a network standpoint that there should be some compensation for providing programming that creates a large audience,” said James Goss, an analyst at Barrington Research Associates in Chicago. “However, from the cable companies point of view, they dont want to pay higher fees in a vacuum.”
Staggered Payments
Jennifer Khoury, a spokeswoman for Philadelphia-based Comcast, declined to comment. ABC spokesman Kevin Brockman said he had no immediate comment beyond Igers statements. CBS spokesman Dana McClintock also declined to comment.
It will take time before programmers all get paid based on the number of viewers, because content-contract expirations are staggered, Goss said. For example, News Corp.s deal with Time Warner Cable to carry cable networks Fox News and Fox Business wasnt negotiated in the Jan. 1 settlement.
Time Warner Cable CEO Glenn Britt has said that Fox wouldnt have been able to start Fox Business without bundling it to Foxs more successful channels.
“What were hearing from consumers, who ultimately pay the bills, not me, is that theyd like more choice, which is smaller packages,” Britt, 60, said in an interview on Dec. 21.