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News Corp.'s Fox, Time Warner Cable strike deal to keep signals on

January 1, 2010 |  4:16 pm

Media giant News Corp. struck a new deal that will keep its Fox-owned television stations -- including KTTV Channel 11 and KCOP Channel 13 in Los Angeles -- and several of its cable networks on Time Warner Cable systems.

The agreement was reached late Friday afternoon, less than a day after the current contract between the two companies expired. A series of extensions meant that consumers never lost their Fox programming. (For a complete recap of the first media battle of 2010, see our story in today's Los Angeles Times.)

The high-stakes game of poker between media mogul Rupert Murdoch’s News Corp. and Time Warner Cable Inc., the nation’s second-largest cable operator, reached a peak in the last few days, with lawmakers and regulators pleading with both companies to hammer out a deal or face their wrath. While both companies publicly attacked each other, talks continued around the clock among executives hunkered down on Fox’s Century City lot.

For consumers, the good news is that the new pact means they won’t have to hook up rabbit ears to their televisions or find an alternative TV service to watch Fox’s programming, including college football or the return of “American Idol” in two weeks.

The bad news is their cable bill may go up.

Fox had initially been seeking $1 per subscriber each month for its television stations. Time Warner Cable’s initial response was to offer 25 cents to 30 cents. The terms of the new deal could not be immediately learned, but industry observers and analysts had been predicting that the starting price tag would ultimately be in the range of 50 cents. Typically these deals run for several years and contain annual increases.

For Fox, securing fees for its TV stations from Time Warner Cable is viewed as an important win. Broadcast networks have long argued that, for their financial health, they need a second source of revenue beyond advertising in the form of fees from cable operators.

The cable industry has resisted paying for those signals, noting that consumers -- albeit a dwindling number -- can get broadcast TV over the air for free. Broadcast networks have countered that most consumers would not subscribe to cable if it didn’t include their local TV stations.

In previous years, TV networks and cable operators had reached a detente of sorts. Instead of charging fees for their stations, networks used negotiating leverage to win capacity on cable systems to launch their own cable channels, such as Fox did with FX.

But there is little room left for new channels on most cable systems, so broadcasters now are pressing for cash, a right provided to them under 1992 legislation. 

Time Warner Cable, meanwhile, can claim that it did its part for consumers by holding down the cost of monthly cable TV bills by not caving in to Fox’s demand for $1 per subscriber. Although viewers were spared losing Fox and its cable channels, including FX and sports channels Fox Sports West and Prime Ticket (Fox News has a separate agreement with Time Warner Cable and was not subject to the negotiations), such rifts have been growing more public. They may also be leading to unintended consequences for the cable and broadcast industries down the road.

Both Time Warner Cable and News Corp., for example, were starting to get heat about their stalemate from Washington lawmakers and regulators, who hinted that there could be repercussions if Fox went dark and denied millions of viewers the joys of a New Year’s weekend of football viewing.

Sen. John F. Kerry (D-Mass.), chairman of the Commerce subcommittee on communication, technology and the Internet, was pushing for Fox to let Time Warner Cable continue carrying its stations. Earlier in the week, he said that if the Fox signals did go dark on Time Warner Cable, he’d ask the Federal Communications Commission to intervene. On Thursday, FCC Chairman Julius Genachowski issued a statement urging “Fox and Time Warner Cable to agree to a temporary extension of carriage.”

However, whether the FCC would have tried to force both sides into a temporary agreement is unclear. Traditionally, the regulatory agency stays out of business negotiations, and whether it could have lawfully asserted itself is a matter of debate.

-- Joe Flint
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