Entertainment Industry

Category: Sinclair Broadcast Group

Fights between programmers and distributors heat up as 2011 nears

We've seen this movie before. The programmer says it isn't getting paid enough for its programming. The cable operator says it already pays too much and, given the tough economy, now is not the time to be asking for more money. The two sides bicker back and forth and take out ads accusing the other of negotiating in bad faith. Eventually, local and national politicians jump into the fray, and then at the last minute a deal is reached.

As the end of the year approaches, there are several skirmishes going on between programmers and distributors that will hit full boil when the clock strikes 2011. It isn't just broadcast networks and local TV stations in these feuds. Viacom, parent of cable channels MTV and Nickelodeon, is in an ugly fight with Suddenlink, a large cable operator with systems in Texas, Louisiana and West Virginia. Comcast's E! and Style Network are in danger of being dropped by satellite broadcaster Dish Network, and its Golf Channel could be dropped by DirecTV. 

The battle everyone is watching is between Sinclair Broadcast Group and Time Warner Cable. Sinclair owns almost 60 television stations across the country, including 20 Fox affiliates. Its stations are carried by Time Warner Cable systems that serve 8.5 million consumers.

Both sides have stopped talking. Earlier in the week, Sinclair said Time Warner Cable rejected an offer to continue carrying its stations for an additional 10 cents per subscriber per month. Unfortunately, neither Sinclair nor Time Warner will say what the total cost of carriage on a per-subscriber basis would be with that additional 10 cents. Given all the heated rhetoric, it seems safe to say it is an increase that would put the cost over 25 cents per subscriber and perhaps even north of 50 cents, with annual increases included as well. 

What makes this dispute worth paying attention to over the others is the behind-the-scenes role that News Corp.'s Fox Broadcasting Co. is playing. Earlier this year, Fox struck a deal for its own TV stations with Time Warner Cable. As part of that pact, there is a clause that allows Time Warner Cable to purchase Fox programming should the cable operator lose the rights to carry the signals of a Fox affiliate.

Fox says it agreed to the clause so consumers wouldn't lose its programming as a result of negotiations gone awry. "Our goal is to protect Fox viewers from any service interruptions, allow our affiliate partners to reap their local ad dollars and continue to negotiate a retransmission agreement without deadline pressure," Scott Grogin, a Fox spokesman has said.  "We also believe that‪ the deal provides significant incentive to both sides to come to an agreement that protects consumers."

Some affiliates think that Fox is meddling and undercutting its own partners. Barry Faber, the general counsel for Sinclair, said earlier this month that Fox's deal with Time Warner Cable "makes it more difficult to negotiate for retransmission consent if your network has provided the cable company an alternative way to receive the feed."

Fox has an interest in seeing Sinclair get as much money as it can from Time Warner Cable because it, like other broadcast networks, wants a cut of any fees their affiliate partners get from cable and satellite operators.

With that in mind, Sinclair and other Fox affiliates are wondering why the network would agree to something that could potentially take away the leverage their affiliates need to cut the best possible deal.

Given that Fox does provide prime-time programming and big sporting events too, it is not surprising that it would want some of that money.

But Fox is asking its affiliates for a big chunk of their so-called retransmission consent revenues, according to industry executives familiar with the situation. That, in turn, is putting pressure on the affiliates to squeeze the cable operators.

Of course, in the end, we all know who will get squeezed the most.

-- Joe Flint

Related posts:

Fox clause is focal point of Sinclair-Time Warner Cable fight

Fox explains its role in Time Warner Cable fight with Sinclair

Fox explains its role in Time Warner Cable fight with Sinclair Broadcast Group

A battle between Time Warner Cable and a big owner of local television stations is getting more complicated.

At the end of the year, Time Warner Cable's deal to carry TV stations owned by Sinclair Broadcast Group expires. Sinclair owns 57 stations around the country including 20 Fox affiliates, many of which operate in markets where Time Warner Cable has systems. Like the big broadcast networks, it wants Time Warner Cable to pay to carry its local stations in cities such as Buffalo, N.Y.; Dayton, Ohio; and San Antonio.

The two are haggling over price, which is normal in these situations. But now there is an added complication. Earlier this year, Time Warner Cable signed a deal with Fox and as part of that deal, the network agreed to provide the cable operator its programming should one of its affiliates -- stations that carry the network's programming but are independently owned -- pull their signal.

That move has not won Fox any friends at Sinclair. In an interview earlier this week, Barry Faber, the general counsel of Sinclair, said Fox's insurance deal with Time Warner Cable "makes it more difficult to negotiate for retransmission consent if your network has provided the cable company an alternative way to receive the feed." Asked what Fox said to that assertion, Faber said, "They have a different take."

Initially, Fox declined to comment on its deal with Time Warner Cable or on whether it was undercutting its own affiliates. On Thursday Fox spokesman Scott Grogin said that while the company does not want to get in between Sinclair and Time Warner Cable, it is accurate to say its deal with Time Warner Cable allows Fox to provide the network's programming to the operator.

Specifically, Fox can provide its own entertainment and sports programming, but not the local and syndicated programming on the station without Sinclair's blessing, and that seems unlikely. Time Warner Cable would pay Fox for that. Neither Fox nor Sinclair would say if any money Fox paid for the network's feed would be shared with the affiliate.

"Our goal is to protect Fox viewers from any service interruptions, allow our affiliate partners to reap their local ad dollars and continue to negotiate a retransmission agreement without deadline pressure," Grogin said. "We also believe that‪ the deal provides significant incentive to both sides to come to an agreement that protects consumers."

Interestingly, earlier this fall Fox pulled its signals from Cablevision Systems Corp. in New York when it couldn't get the deal it wanted. A few weeks later, the two reached an agreement and the signal was returned. Now the network is seen by some of its affiliates as being more interested in protecting a cable operator than in seeing their partners have the same negotiating leverage it enjoyed with Cablevision.

While Sinclair and Time Warner Cable continue to fight, William Lake, the Federal Communications Commission media bureau chief, said Wednesday that the agency would propose new rules for so-called retransmission consent negotiations that "advance the statutory objectives of allowing retrans fees to be set by market forces while protecting the interests of consumers." After all, Lake quipped, "when the elephants fight, it is the grass that suffers."

-- Joe Flint

Related post: Fox clause becomes focal point of spat between Time Warner Cable and Sinclair Broadcast Group.

Fox clause is focal point of fight between Time Warner Cable and Sinclair Broadcast Group

When News Corp.'s Fox Broadcasting struck a big deal with Time Warner Cable last January for distribution rights to its Fox TV stations, it also included an interesting clause that may give some Fox affiliates headaches.

As part of the agreement that calls for Time Warner Cable to pay cash to carry Fox-owned stations, should a Fox affiliate (affiliate being a TV station that carries Fox programming but is not owned by Fox) pull its signal from the cable operator, Fox will offer its programming for up to one year.

That Fox clause may be put to use soon as Time Warner Cable is in a tense distribution negotiation with Sinclair Broadcast Group, a Baltimore-based TV station owner that operates 20 Fox affiliates as well as 38 affiliates of other networks. Their current deal with Time Warner Cable expires Dec. 31.

According to Cable Fax, an industry publication, Time Warner Cable will begin notifying media in markets this week that would be affected by the spat that it had rights to Fox programs including hits such as "Glee" and "American Idol" as well as the 2011 Super Bowl, which is set to air on the network next February. Among the markets where Time Warner Cable has systems and Sinclair has Fox stations are San Antonio, Buffalo, and Dayton, Ohio.

On the surface, Fox's insurance clause with Time Warner Cable would seem to undercut its own affiliates' ability to negotiate a distribution deal. Barry Faber, the general counsel of Sinclair, said, "it makes it more difficult to negotiate for retransmission consent if your network has provided the cable company an alternative way to receive the feed." Asked if he had communicated that sentiment to Fox, Faber said, "They have a different take."

A Fox spokesman declined to comment on the contract with Time Warner Cable or whether the clause would hurt the network's affiliates. Faber said it was his understanding that if Time Warner Cable exercised that option, it would cost the company more than what Sinclair is seeking. Furthermore, he added, Fox only provides 15 hours of prime-time programming a week as well as sports programming, meaning that Time Warner Cable would still have a lot of holes to fill.

"I don't think this puts TWC in position to say, 'I don't need you anymore,'" Faber said.

A Time Warner Cable spokeswoman countered that it is "inaccurate" to say its deal with Fox would cost more than what Sinclair wants for distribution of its stations, although she would not elaborate on the details.

There are Federal Communication Commission rules that prohibit cable operators from bringing in a signal from another market if it loses the rights to carry a local station. However, in this case, Fox is offering a feed of its network programming and nothing else and that seems to effectively skirts the FCC's non-duplication rules.

The clause may create tensions between Fox and its affiliates as well as other broadcast networks who cut similar deals. The networks want a portion of the money their affiliate stations get from cable and satellite operators in so-called retransmission consent fees. Affiliates might be less willing to play ball on that if their networks are also doing deals that could hamper their efforts to get paid from distributors.

-- Joe Flint

 

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