News Corp., Cablevision Report No Progress on Dispute; Talks Resume Monday

News Corp. and Cablevision Systems Corp. ended negotiations today with an agreement to resume talking tomorrow after the media company cut its Fox broadcast signal to Cablevision’s 3 million customers in New York and Philadelphia in a dispute over program fees.

The blackout affects WNYW Channel 5 and WWOR 9 in New York, WTXF 29 in Philadelphia, Fox Business, Nat Geo Wild and Fox Deportes. Cablevision customers were blocked from watching today’s New York Giants-Detroit Lions football game and tonight’s Philadelphia Phillies-San Francisco Giants baseball playoff game. News Corp. urged Cablevision customers to switch to another pay-TV provider.

“No material progress was made” in talks today and “we continue to remain far apart,” a Fox statement e-mailed by spokesman Scott Grogin said. The two sides agreed to “continue talking tomorrow,” the statement showed.

The two companies reached an impasse Oct. 15, said Scott Grogin, a spokesman for Fox, in an e-mail. The two sides met yesterday afternoon, spokesmen for the two companies said.

“The longer this shameful News Corp. blackout of the NFL and Major League Baseball continues, the more obvious it becomes to everyone, including political leaders of both parties, that binding arbitration is the fastest and fairest way to return Fox programming to Cablevision customers,” Cablevision Executive Vice President Charles Schueler said in a statement today.

Cablevision said in a statement yesterday that Fox failed to negotiate in good faith and called the decision to remove the programming “a black eye for broadcast television in America.”

Higher Fees

Broadcasters such as Fox are trying to extract fees from pay-TV operators for signals that were once free. Pay-TV operators are resisting the charges, which are typically passed to the customer, arguing the channels are free over the public airwaves and on the Web. The dispute between Cablevision and News Corp. doesn’t affect Fox News, FX and local sports channels.

“I remain hopeful that these two companies will do what is in the best interest of consumers and find a way quickly to resolve their differences,” U.S. Federal Communications Commission Chairman Julius Genachowski said in a statement.

Cablevision, based in Bethpage, New York, said News Corp. wants more than $150 million a year in so-called retransmission fees for the Fox stations and some cable channels, up from $70 million a year it already pays the media company. Fox said it wants “fair compensation.”

Laser Focus

“Fox is laser-focused on capturing significant retrans dollars and we see no reason why they would give in,” Rich Greenfield, an analyst at BTIG LLC, said in an Oct. 15 note. The fact that Fox holds the rights to air local sports programming, like the Giants and New York Yankees games, gives them leverage over Cablevision, he said.

This year, squabbles between channel owners and distributors over fees have led to the most TV blackouts in at least a decade.

In March, Cablevision subscribers lost access to Walt Disney Co.’s ABC network and the start of the annual Oscars telecast before a deal was struck. The cable operator also lost the Food Network and HGTV for about two weeks before a deal was made and the channels restored.

Cablevision on Oct. 14 said it would accept binding arbitration with Fox that would allow them to continue the negotiations without the threat of a blackout. U.S. Representatives Steve Israel, a New York Democrat, and Peter King, a New York Republican, sought the commitment in a letter to both companies.

Kerry Comments

Senator John Kerry, a Massachusetts Democrat, chairman of a subcommittee overseeing communications, technology and the Internet, said he plans to introduce legislation keeping such disputes from taking channels off the air until the FCC is able to decide on the need for arbitration.

“This is the best way to empower consumers, increase transparency, and preserve the free market,” Kerry said in an e-mailed statement.

Fox, in a statement, rejected that approach, saying arbitration would “reward Cablevision for refusing to negotiate fairly,” and would “ensure that more unnecessary disputes arise in the future.” Fox said direct negotiation was the only way to resolve the issue.

Separately, Dish Network Corp., based in Englewood, Colorado, is battling with News Corp. over costs to carry Fox regional sports networks and two cable channels. Those networks went dark on the satellite operators’ system on Oct. 1 and remain off while the two parties negotiate. The dispute may intensify later this month when Dish’s contract to carry the Fox broadcast network, the home of “The Simpsons,” expires.

Fox Demands

Genachowski said at a news conference on Oct. 14 the commission continues “to be concerned about the potential effect” these battles have on consumers, and that the FCC wants “greater information and notice to consumers” as these negotiations affect subscribers’ viewing options.

The FCC had urged Fox to extend the deadline until Oct. 19 and invited both to Washington for arbitration with a third party.

News Corp., controlled by Chairman and Chief Executive Officer Rupert Murdoch, gained 11 cents to $14.19 Oct. 15 in Nasdaq Stock Market trading. Class A shares of the New York- based company have increased 3.6 percent in 2010. Cablevision, controlled by the Dolan family, advanced 14 cents to $26.66 and has risen 25 percent this year.

Time Warner Dispute

News Corp. was in a similar dispute with Time Warner Cable Inc., the nation’s second-largest cable operator, late last year. News Corp. sought $1 a month per subscriber for its Fox stations, people familiar with the matter said at the time.

The two sides reached a deal without any channels being pulled in a multiyear contract that climbs to 75 cents a subscriber, Greenfield said.

David Joyce, an analyst at Miller Tabak & Co. in New York, estimates News Corp. is seeking $62.6 million a year from Cablevision for its Fox broadcast channels.

The media company is also seeking $18.4 million a year for Fox Business, $14.7 million for Nat Geo Wild, and $2.3 million for Fox Deportes, Joyce wrote in an Oct. 13 report.

To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net.

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net.

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