Fallout: Time Warner, Fox Deal May Set Benchmark For Retrans Disputes
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.
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."