One reason Fox is reluctant to arbitrate its contract dispute with Cablevision
In its standoff with Cablevision Systems Corp. over a new deal for the cable operator to carry its local TV stations in New York and Philadelphia, News Corp.'s Fox has steadfastly refused to go the arbitration route.
While Cablevision is pushing for arbitration, Fox argues that the two companies should be able to strike a new deal on their own without a third-party mediator. Fox also has been busy lobbying Capitol Hill to stay out of the spat. Several congressman and senators are arguing that the two should go into arbitration and that the Federal Communications Commission should step in. The FCC, which is trying to stay out of the fight, has also advocated that the two go to a third party if they can't come to terms.
Fox certainly is worried about setting a precedent by bringing in an arbitrator, but more importantly, it doesn't want to risk having to rewrite deals it has with other distributors -- particularly Time Warner Cable, the nation's second-largest cable operator, with 14.5 million subscribers. Earlier this year, Fox wrapped up a long-term deal with Time Warner Cable which, according to people familiar with the pact, includes a most-favored-nations clause.
In other words, if Fox goes into arbitration and the rate set is lower than what Time Warner Cable is paying, Fox would likely have to adjust that deal. This is why Fox is offering Cablevision the same deal it is offering Time Warner Cable.
Cablevision had a chance to do a deal with Fox last year but instead pushed for an extension of one year. The company, people inside Fox say, was asked by Cablevision to complete its big deals with other distributors such as Time Warner Cable and then come back to Cablevision. Now apparently Cablevision thinks it has found the way to try to pressure Fox in cutting it a better deal.
So far, Fox has resisted the push for arbitration. But just as Cablevision will start to hear from Yankee fans if the Bronx Bombers make the World Series and some 3 million New Yorkers can't watch the game, Fox will get more pressure from the government for resisting arbitration the longer this drags on. Cablevision has shown in the past that it is willing to play the waiting game. It once kept the Yankees' YES Network off its systems for a whole baseball season. Fox, particularly its New York stations WNYW and WWOR, may not be able to afford that much patience.
-- Joe Flint