Further Fox Blackouts Loom as Dish, News Corp. Dispute Fees

Dish Network Corp. customers in some cities may face their own Fox blackout next week, as the satellite company feuds with Fox parent News Corp. over programming fees ahead of a Halloween contract deadline.

Dish’s existing contract to carry more than 25 local Fox TV stations expires at midnight on Oct. 31. If an agreement can’t be reached, the channels would go dark for more than 3 million customers in New York, Los Angeles, Washington and other cities. That would affect Fox shows such as “House” and potentially the last three games of the World Series.

Fox already cut off programming to Cablevision Systems Corp. in a similar dispute, affecting about 3 million customers in the New York area. News Corp. said it considers the Fox network just as valuable as the most expensive cable programming because of sports shows and hits like “American Idol.”

“It’s going to get really nasty,” Matthew Harrigan, an analyst at Wunderlich Securities in Denver, said in an interview. “Dish is more exposed to programming costs than any other pay-TV provider because they face a lot of competition. Fox is absolutely determined to force this through.”

Dish and Fox said they have not yet reached an agreement. Francie Bauer, a Dish spokeswoman, said yesterday in an interview the company is hopeful it can reach a “fair” agreement. Scott Grogin, a Fox spokesman, said in an e-mail yesterday that the company wants a “successful resolution.”

FX and Nat Geo

Dish, the second-largest U.S. satellite-television provider, rose 16 cents to $19.87 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have declined 4.3 percent this year. News Corp. dropped 1 cent to $14.48 and has gained 5.8 percent in 2010.

Dish subscribers haven’t been able to watch some Fox programming, including FX, National Geographic and 19 local sports channels, since separate fee talks broke down on Oct. 1. Dish said News Corp. was asking for a rate increase of more than 50 percent for its cable content, a claim News Corp. has called “flat out wrong.”

Pay-TV operators are resisting increased charges, which are typically passed to the customer, arguing the channels are free over the public airwaves and on the Internet. Dish, whose service attracts economically conscious consumers, has expressed concern it won’t be able to pass along the higher fees in a sluggish economy.

Higher Expenses

Englewood, Colorado-based Dish lost almost 20,000 subscribers in the second quarter amid increased competition and weak consumer spending. Since Dish only offers video, it can’t offset higher expenses with other services such as phone or broadband Internet, unlike rival cable companies including Time Warner Cable Inc.

This year, disputes between channel owners and distributors over fees have led to the most TV blackouts in at least a decade. In October, Dish subscribers lost access to MSG Network and MSG Plus. In May, Dish threatened to keep the Weather Channel off its systems amid negotiations.

Fox pulled its programming from Cablevision on Oct. 16 and the blackout has been the longest of its kind for a major broadcast network for a million or more people in at least a decade. News Corp. is said to be asking $1 a subscriber per month for the programming, said Harrigan.

Cablevision has called on the U.S. Federal Communications Commission to intervene and to require Fox to agree to binding arbitration. Fox has rebuffed arbitration, saying direct negotiation is the only way to resolve the dispute.

Richard Carlson, a Dish subscriber in Rosemount, Minnesota, has lost his regional sports programming and is concerned about the Fox broadcast network being pulled off the air. He said he is frustrated and doesn’t know which side is telling the truth.

“Fox keeps pushing us to go to another provider, but if I do that, I don’t know if in two months I’ll be facing the same thing,” Carlson said. “As consumers, we’re screwed.”

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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