Fox and Cablevision take fight to FCC
Cablevision Systems Corp. is asking the government to force News Corp.'s Fox Broadcasting to restore the signals of its New York and Philadelphia television stations to Cablevision subscribers that were pulled almost two weeks ago as a result of a contract dispute.
In a letter sent on Monday to the Federal Communications Commission, Cablevision said News Corp. is negotiating in bad faith. News Corp. countered that it was Cablevision that wasn't playing fair and that the government should let the two sides resolve their differences without any federal intervention.
The letters were in response to an FCC request last Friday that Cablevision and News Corp. offer details on their negotiations to the government agency so it can decide whether both companies are engaging in good-faith negotiations.
Though the FCC doesn't usually take sides in disputes between programmers and distributors, Media Bureau Chief William Lake reminded the pair that they have a "statutory duty to engage in 'good-faith' negotiations."
Meanwhile, talks have all but ceased. Last week, News Corp. Chief Operating Officer Chase Carey flew to New York to meet with Cablevision Chief Executive Jim Dolan but neither budged.
In its filing, Cablevision said it has offered a rate for Fox's stations that is more than it pays other broadcasters "despite the fact that it is not the highest rated network in our market." News Corp., Cablevision said, has refused to negotiate, instead "demanding a take it or leave it rate." News Corp., according to Cablevision, said it is bound by a most favored nation clause in its deal with Time Warner Cable, the other major pay TV distributor in New York City. Such a clause would require News Corp. to give Time Warner Cable the same rate it gave Cablevision if the latter was able to negotiate a better deal. Fox officials have privately acknowledged that the Time Warner Cable deal contains a most favored nation clause.
According to Cablevision, News Corp. wants $80 million annually for its TV stations on top of the $70 million it already collects in programming fees for other cable channels including Fox News Channel. Last year, as part of an extension to carry the Fox stations WNYW and WWOR New York and WTXF Philadelphia, Cablevision agreed to carry Fox's National Geographic Wild network and Fox Business Channel.
It is the carriage of additional cable channels in return for access to Fox's stations that has Cablevision particularly incensed.
"The broadcast fee was conditioned on Cablevision agreeing to tens of millions of dollars of new fees on cable programming," the company said. When it asked for a deal for just the TV stations, News Corp. responded with a proposal for the Fox stations that would have increased the price more than four-fold for those stations in prior proposals.
Cablevision went on to say News Corp., which operates two television stations and two newspapers in New York City, is abusing its power and "attempting to leverage its unprecedented government-enabled media consolidation to force Cablevision to accept unreasonable fee demands.
News Corp. countered that it is Cablevision that has negotiated in bad faith. In its filing to the FCC, the company said Cablevision indicated that it would agree to a deal similar to what Time Warner Cable signed and to come back to them after that deal was done. But after that deal was done, Cablevision refused to honor what Fox said was a "gentleman's agreement" and it was becoming clear that Cablevison intended to pursue a path geared toward a larger agenda of political and regulatory intervention.
Fox acknowledged trying to bundle some cable channels with its local TV stations, but argued that doing so allowed it to lower the rate for the broadcast stations. The packaging of lesser channels with more powerful ones is one of the major dividing issues between programmers and distributors. Programmers, such as Fox, are willing to reduce the rate for its big channels in return for carrying less popular channels.
While programmers argue that such packaging is good for everyone, smaller programmers who don't have leverage are shut out and valued channel space is eaten up by a handful of companies.
The filings are not without a few laughs. News Corp. said at one point Cablevision argued that Fox's WWOR New York is "worthless" yet later offered to buy the station.
With the World Series about to start, it is looking more and more like about 3 million people in the New York region will have to leave their homes if they want to see the games. Of course, with the Yankees not playing, the anger might not be as strong as it would have been if the Bronx Bombers had made the cut.
-- Joe Flint
Top photo: News Corp. Chief Operation Officer Chase Carey. Credit: Valerie Macon / Getty Images Bottom photo: Cablevision Chief Executive Jim Dolan. Credit: Kathy Willens / Associated Press