WHY IS THIS HAPPENING?
Long term deals with FOX’s television stations in New York, Los Angeles, Austin, Dallas, Detroit, Orlando and Tampa are expiring on December 31st. More than 13 million households and 30 million people from New York to Los Angeles stand to lose some of America’s most popular entertainment including many of Fox’s cable channels, such as FX, SPEED, FUEL TV, Fox Movie Channel, Fox Reality Channel, Fox Soccer Channel, Fox Sports en Español, and FS Arizona, Florida, Houston, Indiana, Kansas City, Midwest, Southwest, West, and Prime Ticket, SportSouth, and Sun Sports unless we reach a fair agreement soon.
Fox programming included in the proposal has something for virtually everyone, everywhere – appealing to viewers who are passionate about Award-winning original dramas and comedies; live National Football League, Major League Baseball, National Basketball Association, NASCAR, National Hockey League, and Major League Soccer games; international sports competitions; racing; action-sports; and Spanish-language sports programming.
FACTS ABOUT FOX'S NEGOTIATIONS WITH TWC
Over Thanksgiving weekend, Time Warner Cable (TWC) unleashed an advertising blitz announcing its intention to “get tough” with programmers by refusing to play fair with programmers. The campaign masquerades as a grassroots effort to enlist viewer participation. But unfortunately it is full of distortions. Here are the biggest Myths and Facts from this campaign.
Myth: If programmers weren’t asking for fair value compensation, consumers’ cable rates would be lower.
Fact: Cable companies have been raising rates on consumers for years. In good economic times, rates have gone up. In the recent recession, rates have still gone up. Even if Fox does not receive fair value compensation for its content cable bills are likely to still go up. In fact, in some markets Time Warner Cable has announced 20% rate increases while simultaneously threatening to “get tough” with programmers.
Myth: TWC provides its customers broadcast network signals for free as part of their basic cable package, so it’s not right for TWC to have to pay for something it gives away.
Fact: TWC actually charges a significant fee for broadcast networks as part of their Basic Cable package. In fact, on TWC’s own pricing guide, “Broadcast” is broken out as a separate line item. TWC charges its subscribers as much as $36 per month for the 6 broadcast networks. Not one penny of that is being shared with Fox.
Myth: If cable companies like TWC pay fair value for the programming provided by broadcasters and other content providers, it will “force” them to raise cable fees for consumers.
Fact: TWC is a successful, profitable business (thanks in part to the money they make off of broadcasters’ content). It can surely afford to fairly compensate broadcasters for that content without raising rates. Just how profitable is TWC? TWC’s operating profit in 2008 exceeded $6 billion. TWC is on track to finish 2009 with nearly $2 billion in free cash flow – up 20% over the previous year. So far this year, TWC has generated more than $8 billion in subscription revenues from video alone and its programming costs represent only 22% of those revenues. In the past quarter alone, TWC generated monthly service revenues of $69 per month per video subscriber, while its average programming cost per subscriber was $26. That is a profit contribution of more than $43 per video sub per month. Overall, the company achieved an operating profit margin of 36% in its last reported quarter.
Myth: The compensation being sought by programmers like FOX is “exorbitant” and “unreasonable.”
Fact: The compensation being sought for the FOX stations is entirely reasonable. Based on the comparable cost of our programming, the Fox stations could charge $4-5 per subscriber per month. TNT gets $1 per subscriber, but spends about 80% less on programming than FOX. And if one looks at the ratings FOX and its stations get relative to cable networks, the value would actually be closer to $10 per subscriber. Moreover, FOX attracts more viewers than the five most expensive cable networks combined (ESPN, TNT, USA, ESPN2 and NFL Net). The bottom line is that the Fox stations feature some of the nation’s most-watched programming with shows such as 24, American Idol, House, Glee, and The Simpsons, as well as the most compelling sports on television with the National Football League, Major League Baseball, and NASCAR. The price being asked for as compensation for all this value is extremely reasonable.
Myth: Broadcasters like FOX are already receiving fair compensation for their programming.
Fact: The broadcast television business is suffering because broadcast networks are competing on an uneven playing field with cable networks. Cable networks have two streams of revenue: advertising and fees paid by distributors. Broadcasters like FOX have the single stream of advertising. This has allowed cable networks like ESPN to get a leg up to purchase the rights to content like Monday Night Football and The BCS Championship Series – which means that tens of millions of Americans who can’t afford or choose not to subscribe to cable or satellite miss this event programming. The future of free, over-the-air broadcast programming requires broadcasters to compete on a level playing field – which means getting fair value compensation from cable companies like Time Warner Cable.
Myth: Consumers want cable companies like Time Warner Cable to “get tough” with programmers.MYTHS AND FACTS OF THE NEGOTIATIONS BETWEEN FOX AND BRIGHT HOUSE</b>
Over the past months, FOX has attempted to engage in good-faith negotiations with Time Warner Cable, which is negotiating on behalf of Bright House. As the December 31 deadline for these negotiations draws near, Bright House has launched an advertising and PR campaign that could mislead viewers. At FOX, we think viewers deserve the facts.
Myth #1: Bright House is running ads suggesting that FOX can choose to keep its programming on Bright House systems even if an agreement is not reached, so that viewers won’t lose access to the BCS College Bowl Games, including the University of Florida Gators’ Sugar Bowl appearance.
Fact: Bright House Cable is the only entity with the power to protect its subscribers from losing access to the Sugar Bowl. All that is required is reaching a fair agreement with FOX. Obviously, FOX cannot provide our programming to a cable company in absence of an agreement. No responsible business can give away its product for free – and Bright House knows it. Bright House also knows perfectly well that a fair agreement can be reached by December 31, so long as it is willing to agree to reasonable compensation for the valuable programming FOX provides.
Myth #2: Bright House Cable is asserting that FOX extended a special courtesy to Cablevision, the New York area cable provider, to allow it to carry the World Series without an agreement.
Fact: This is categorically untrue. Bright House has no knowledge of our dealings with other cable companies. Without commenting on specific negotiations, we can say that, consistent with FCC regulations, other cable companies do not carry the FOX stations in the absence of a binding agreement that gives them that right.
Myth #3: Bright House cable implies that it is actively engaged in the negotiations with FOX, as it has been in “hundreds” of similar deals they have reached with other programmers.
Fact: With the December 31 deadline fast approaching and access to the Sugar Bowl and other valued programming at risk, Bright House has taken a hands-off approach to negotiations with FOX. Instead, it has put the interests of its viewers in the hands of Time Warner Cable, which is negotiating with FOX on Bright House’s behalf. Bright House has attempted to assure its subscribers not to worry, however, Bright House needs to get in the game to ensure that negotiations work toward a fair agreement.
OT: But this is my first post :D
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