News Corp., Cablevision to Resume Talks After Cutoff Over Fees

News Corp. and Cablevision to Resume Talks
The fact that Fox holds the rights to air local sports programming gives them leverage over Cablevision, analyst Rich Greenfield said. Photographer: Al Messerschmidt/Getty Images

News Corp. and Cablevision Systems Corp. plan to resume talks today 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 two companies returned to the negotiating table in New York yesterday, according to spokesman for both companies, after reaching an impasse Friday night. The two sides plan to meet again today, the spokesmen said.

“No material progress was made and we remain far apart,” said Scott Grogin, a spokesman for Fox said in an e-mail.

The blackout affects WNYW Channel 5 and WWOR 9 in New York, WTXF 9 in Philadelphia, Fox Business, Nat Geo Wild and Fox Deportes. Cablevision customers will lose access to the New York Giants vs. Detroit Lions football game today and baseball’s playoffs if a settlement isn’t reached. News Corp. urged Cablevision customers to switch to another pay-TV provider.

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

Broadcasters like 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.

Genachowski ‘Hopeful’

“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.”

“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.

Food Network, HGTV

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.

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.

Other Battles

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.

Cablevision called on News Corp. again yesterday to submit the dispute to a third party.

“We demand that News Corp. put the viewers ahead of its own greed and immediately restore these channels to our customers and agree to binding arbitration to reach a fair agreement,” Charles Schueler, a spokesman for Cablevision, said in yesterday’s statement.

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 Friday 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.

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.

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