As a midnight Thursday deadline approaches, Time Warner Cable offered an olive branch that could leave the Fox network and some of its cable TV channels on the lineup for millions of subscribers
for now. But an executive at Fox owner News Corp. indicated a signal interruption was likely.
In dispute are the fees that Time Warner Cable Inc. pays Fox to carry its channels. In the past, the Fox network was offered for free, and cable companies essentially paid more for FX and other cable channels that News Corp. also owns. This time, News Corp. is demanding $1 per subscriber every month for the network itself.
Fox, hurt by reductions in advertising revenue and increases in programming costs, argues that Time Warner Cable is making money off its programming, so it should get a cut of subscription revenue. Time Warner Cable says the demanded fees are excessive.
Time Warner Cable CEO Glenn Britt said Wednesday the cable TV operator will agree to binding arbitration and any interim steps necessary to keep Fox channels on while talks continue.
"Consumers should not be held hostage during these negotiations. That's just wrong," Britt said in an interview Wednesday.
But in a note to employees Wednesday, News Corp. Chief Operating Officer Chase Carey said temporarily extending the current terms past Thursday would "simply extend the period of time that Time Warner profits from our marquee programming without fairly compensating Fox for it."
He also rejected arbitration as a possibility in a letter to Sen. John Kerry, D-Mass., who had pleaded for both sides to agree to uninterrupted television for football fans "through the college bowl season."
Late Wednesday, Kerry threatened to ask the Federal Communications Commission to intervene if the sides can't agree in time.
If a new deal isn't reached, programs that could disappear from Time Warner Cable Inc.'s lineup include "The Simpsons" and several football games among them, the Sugar Bowl on Friday, the Cotton Bowl on Saturday and the NFL's final regular season contests on Sunday. Bright House Networks' cable TV systems also face a Thursday deadline with News Corp.
In Florida, two television viewers filed a lawsuit Wednesday against News Corp., seeking an injunction to ensure that the Fox broadcast of the Florida-Cincinnati Sugar Bowl contest would remain on Bright House's cable system. Circuit Judge Maura Smith in Orlando did not immediately rule.
Time Warner Cable has more than 13 million TV subscribers and Bright House has more than 2 million, though their dispute involving the Fox network only concerns 14 Fox-owned stations covering such markets as Los Angeles, New York, Dallas-Fort Worth and Austin, Texas and Tampa Bay-St. Petersburg and Orlando, Fla.
Besides the Fox broadcast network, six cable channels FX, Speed, Fuel, Fox Reality, Fox Soccer and Fox Sports en Espanol and certain regional sports networks were also up for negotiations throughout the Time Warner Cable and Bright House service territories. Unaffected are Fox News, Fox Business Network and National Geographic, which is partially owned by News Corp. Those three are covered by deals that aren't expiring yet.
Separately, TV station owners are also negotiating deals with several cable systems around the country. About 650,000 subscribers of cable TV through Mediacom Communications Corp. in markets as large as Des Moines and Cedar Rapids, Iowa, are also in jeopardy of losing Fox and CBS broadcast signals as a fee dispute with Sinclair Broadcast Group Inc. nears a midnight Thursday deadline.
Many of these disputes get resolved at the last minute with no disruption of service. Last year, Viacom Inc. threatened to pull Comedy Central, Nickelodeon and other channels from Time Warner Cable but the two reached a last-minute deal.
The last time a major broadcaster went dark on a cable TV operator was when The Walt Disney Co. asked Time Warner to pull signals from its 10 ABC stations in May 2000 in a fee dispute. Time Warner took the signal off for a day before succumbing to pressure and agreeing to an extension. A deal was made later that month.
"Normally they work things out," said Derek Baine, a senior analyst at SNL Kagan in Monterey, Calif. "But it's very hostile and it's very ugly."
Thomas Eagan, an analyst at Collins Stewart LLC, said Time Warner Cable would take the more direct hit from a standoff because subscribers could defect to one of its competitors, such as DirecTV or Verizon's FiOS.
Consumers would still be able to get the stations with an antenna if they have a digital TV or converter box, but most Americans these days get broadcast channels through subscription services such as cable TV or satellite. And if a channel gets pulled, they'll likely call their cable TV operator, not the network.
Although the networks are transmitted freely over the airwaves, the companies behind them have been increasingly demanding fees from the cable TV and satellite operators for retransmitting those signals, in part to pay for expensive event programming such as sports.
"It costs money to satisfy that thirst of consumers to go out and buy the product, the football, the baseball, the NASCAR," Tony Vinciquerra, chairman of Fox Networks Group, said in an interview. "To stay vibrant in the world of television, we need to be able to compete."
In the past, Fox had offered the broadcast signal from Fox-owned stations for free in exchange for subscriber fees on new cable channels it launched. Since 1994, Fox has started nearly a dozen cable channels, including FX, Speed, Fox College Sports and Fuel. But launching new channels has slowed, putting the focus on getting paid for the broadcast signals, which still command the largest TV audiences.
Fox is asking for $1 per month per subscriber, which Fox says is in line with what Time Warner Cable pays for the lower-rated cable channel, TNT. But Britt said his cable TV company has already cut deals for "much lower" than that with Fox affiliates stations that carry Fox programming but are owned by other companies.
He said any higher fees would need to be passed on to consumers in their monthly subscription bills.
Scott Varley, a 45-year-old Time Warner Cable subscriber in Los Angeles, said he would miss the Speed channel and other Fox programs if they were pulled. But he expects the sides will eventually reach a deal, and he's resigned to accepting whatever price increases his provider imposes.
"Everybody always complains that they don't want to pay more for cable, but they'll end up doing it because we don't have any choice."