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News Corp. and DirecTV divided over bundling

October 24, 2011 |  3:31 pm

Remember when you were a kid choosing a baseball team for a pick-up game and sometimes you had to take a couple of not-so-great players to get the one superstar you wanted?

Well, that is very similar to how cable programmers try to sell their channels, and some distributors are tired of it and want to take their bat and ball and go home.

One of those distributors is satellite broadcaster DirecTV, which last week started telling its customers that it may be dropping more than two dozen cable channels owned by News Corp. on Nov. 1 if the two companies can't reach a new agreement. DirecTV has said that News Corp. wants a 40% increase in subscriber fees for the channels.

"We already provide News Corp. nearly a billion dollars a year for their channels, and we have no problem continuing to compensate them fairly," the satellite broadcaster said in a statement. The deal being offered is "unfair and unwarranted."

News Corp. has countered that the 40% figure is "ridiculous."

The biggest network that DirecTV's 19.4 million subscribers may lose is FX, which is home to hit shows "Sons of Anarchy," "Louie," "Justified" and "It's Always Sunny in Philadelphia." Already outspoken "Sons of Anarchy" creator Kurt Sutter has taken to Twitter to blast DirecTV, using words that are not only inappropriate for a family newspaper, but words that would have trouble even on an X-rated website. Other channels in jeopardy include 19 of Fox's regional sports networks as well as Speed and Fuel.

But money is only part of what this battle is about. DirecTV is also resisting having to carry channels like National Geographic, Fuel and Speed just to get the more popular networks such as FX. Last month, DirecTV and Time Warner Cable both complained to the Federal Communications Commission about the practice, which is known in the industry as bundling.

DirecTV Executive Vice President Derek Chang said the company was not against rate increases for channels that were worthy of them. However, he said News Corp. was unwilling to seriously discuss selling its networks on an individual basis.

Often programmers that own multiple networks will sell them on an individual basis, but offer substantial discounts if the less sought-after channels are carried along with the highly desirable ones.

That being the case, some might wonder what the harm is with bundling. However, for smaller programmers, getting carriage on distributors becomes more difficult because bigger companies use their leverage to gobble up channel positions.

-- Joe Flint


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