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[UPDATED] Fox and Time Warner agree to three-hour extension in deal talks

December 31, 2009 |  9:24 pm

Fox parent News Corp. and Time Warner Cable have agreed to a three-hour extension to keep the Fox TV stations on Time Warner Cable as talks go on to hammer out a new distribution deal to replace the old agreement that just expired on the East Coast and expires on the West Coast at midnight.

UPDATE: Talks between the two companies continued into Friday morning and the Fox signal is still on Time Warner Cable systems.

Representatives for both sides confirmed that negotiations between the two companies, which have been  taking place over for the last few days in a conference room on Fox’s Century City lot, are moving along. Teams from both companies have been meeting and then retreating to their own war rooms to review the latest offers while munching on catered food and an endless supply of coffee and soda.

Fox, which owns KTTV-TV Channel 11 and KCOP-TV Channel 13  in Los Angeles, had been threatening to remove its TV stations and many of its cable networks if it could not reach an accord with Time Warner Cable. That would have meant that more than 1 million Time Warner Cable subscribers in Southern California and 4 million in cities around the country, including in New York and Dallas, would have lost the signals for Fox while the network aired a slew of big college bowl games and NFL football.

The two sides are haggling over a price tag for Time Warner Cable to carry the Fox TV stations. Fox is seeking about $1 per subscriber each month, while Time Warner has made an offer between 25 and 30 cents, according to people close to the talks.

The game of chicken between Fox and Time Warner Cable could come at a heavy cost to both companies if the signals go dark. For Fox, not having its stations on Time Warner Cable systems in Los Angeles, New York and Dallas  — among other big cities  —  probably would mean that ratings for its TV shows would fall. That in turn means that Fox might have to refund money to advertisers. Typically, when an advertiser buys time on television, it comes with a guarantee of reaching a certain number of viewers. If that number is not reached, the advertiser can seek additional commercial time for free or get its money back.

The risk for Time Warner Cable, which is the nation’s second-largest cable distributor with more than 14 million subscribers – 4 million of whom are in markets where Fox owns TV stations – was that frustrated consumers might drop their cable service for a rival that has a deal with Fox.

Both companies no doubt would also face a beating in the court of public opinion. In dueling ad campaigns, Time Warner Cable has accused Fox of trying to gouge consumers with its “massive price increases,” while Fox has countered that the cable giant is trying to shortchange viewers and line its own pockets by not paying a fair price for its programming.

For now, those grim scenarios have been put on hold, for at least a few more hours.

-- Joe Flint