Murdoch: Carrying Fox Network Will Cost

by David Goetzl , October 16, 2009

Rupert Murdoch

Rupert Murdoch wants to charge for access to news-oriented Web sites in the News Corp. portfolio. Now, he's determined to extract fees from cable and satellite operators to carry the Fox network.

At a company shareholder meeting Friday, the CEO said cable and satellite operators need to pay News Corp. "a small portion of the profits" they gain from offering the Fox network.

The model does not appear to be novel. News Corp. would seek retransmission consent fees from all distributors to carry the Fox-owned local stations. And the company has some leverage -- owning the Fox outlet in nine of the top-10 markets.

"We realize this is going to be a tough challenge," he said. "And we're determined to take a leadership position in creating an economic template for the future."

But CBS has pursued that path, as have multiple station groups. A News Corp. representative declined to elaborate on Murdoch's comments. No word on why Fox has not pursued this strategy sooner or if it has received some payments and is simply taking a harder line.

NBC and ABC appear to have gone in a different direction, opting to cut quid-pro-quo deals, where operators can carry their stations for free -- effectively in exchange for paying a premium to offer their cable channels.

What would be different here is if Fox could craft a deal structure where an operator was willing to engage in some sort of profit-sharing, rather than a straight carriage payment.

Murdoch suggested that paying retrans fees is advantageous for both sides. Fox (and other broadcasters) provide operators with their highest-rated programming. But continuing to produce those hits is a struggle. Less compelling programming from Fox would, in turn, trickle down to operators and possibly hurt customer retention efforts.

"Clearly, the broadcast model is challenged," he said. "Good programming is expensive and can no longer be supported solely by advertising revenue."

Murdoch has also said he wants to charge users access to Web sites for the New York Post, Fox News Channel and top London papers. Plus, he's determined to marginalize aggregators that sell advertising on Web pages that may just direct viewers to News Corp.-owned sites.

"Successful newspapers in the future will charge for their content and aggregators will largely be excluded," he said.

Over the next year, Murdoch said News Corp. as a company will depend "significantly less" on ad dollars to provide revenues than it traditionally has.

"I'm confident this trend will continue to grow in the coming years," he said.

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5 comments about "Murdoch: Carrying Fox Network Will Cost ".

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Jason Jacobi from ., October 18, 2009 at 3:26 a.m.
Murdoch is truly an out of touch Old Man if he thinks websites like those under the Fox Family umbrella will be able to sustain profitability by charging customers for access to information. What year is it; 1994?
Hell, my 4 year-old daughter could probably make better business decisions; or at least wouldn't put an "empire" of employee jobs at risk with out of touch statements like this.
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Jonathan Ames from BlueLine Cinema, October 19, 2009 at 10:31 a.m.

I don't reaaly know about the rest of the country but saying Fox wasn't goin g to be carried in Los Angeles is like saying fish will not be allowed to ride bicycles on the street. A couple good programs; mostly Enquirer-Star level programing. And as for "News", I already get SyFY.

Dave Woodall from fiorano associates, October 19, 2009 at 5:20 p.m.

I'm confused...
When Murdoch says, "...cable and satellite operators need to pay News Corp. 'a small portion of the profits' they gain from offering the Fox network.", what profits is he referring to? If he's talking about the profits they gain from re-transmitting "THE" Fox Network (home to House, American Idol, The Simpsons, etc), as opposed to one of his cable netlets, there AREN'T any.
Unless Murdoch is delusional to the point of thinking the only reason people purchase satellite or cable-delivered television is to watch the Fox Network, satellite and cable operators have no commercial avails to sell in the Fox Network from which to generate these mystery "profits" he's referring to.
No, I think Rupert's in for a rude awakening when it comes to demanding retrans fees from cable and satellite distributors for The Fox Network...
In my market we're seeing exactly the OPPOSITE business model taking shape: Satellite TV operators demanding carriage fees FROM broadcasters. The theory being the best programming in the world is worthless without an audience. Were it not for the fragmented nature of its distribution environment, I think this model would gain traction among cable TV operators too.
For the health of their long-term business, both content providers and content distributors need to admit that each is worthless without the other and focus on better ways to monetize their operations besides cannibalizing each other.
As far as Murdoch's intent to charge users for access to the web sites of his media properties, while marginalizing aggregators, what cracks me up the most is the fact that these very properties are themselves aggregators! Maybe Rupe should check-out a copy of his Post or Times and count how many AP or Reuters by-lines there are!
As more readers/viewers migrate on-line, it should become EASIER (and less expensive) for content providers to achieve net profitability through advertising-generated revenue. But guys like Murdoch just can't stand to give-up on the thought of a subscription-based revenue stream and will never grasp the concept of how riduculously cheap and elementary it is to build a loyal on-line audience - and monetize it.

Howie Goldfarb from Blue Star Strategic Marketing, October 21, 2009 at 11:36 a.m.

I have no problem with Fox asking Cable Networks to charge for his news channels. But in return this needs to be opt-in. Meaning I get to choose whether Fox reaches my TV. Since 1% of the US watches Fox News and 20% of the country hate Fox News. It might be interesting to see how many people opt out of receiving the channel. Fox still makes more money assuming the loss of TV sets doesn't affect their costs. Getting 3 million+ people to pay $1 a month = $36 million a year in extra revenue which is nothing to sneeze at.

John Murawski, October 23, 2009 at 10:30 a.m.

Excuse me Mr. Murdoch, but haven't cable operators and their subscribers suffered enough? After being required to add new Fox services like Fuel, National Geographic or Fox Reality as quid pro quo for retransmission consent, now you want cash too? Be prepared for a backlash as cable operators disengage themselves from carrying many of the Fox networks that they've added in the past 12 years. I doubt that many operators would have added Fuel, NatGeo or Fox Reality were it not for the option to carry those networks in lieu of paying retrans fees for Fox O&O's. It ain't gonna be pretty.