A temporary blackout of Fox TV series and football games from Time Warner Cable systems threatened for New Year's day due to a retransmission fee dispute signals a bigger upset in 2010: the morphing of free broadcasters into multi-screen paid content providers.
The days of free TV are waning.
While a prolonged stand-off was averted, with Time Warner Cable and Fox settling in time to accommodate New Year's football games, such fee disputes will intensify. Broadcast TV networks are scrambling for new ways to finance the programs being distributed well beyond prime time.
The transformation that is underway will jolt couch potatoes out of their long-seated complacency and forever change the face of American television.
Having steadily lost viewers and advertising dollars to their cable counterparts, the Big 4 TV networks now are fighting for economic survival by insisting on a second revenue stream of access fees from cable operators and consumers.
A stunning double-digit decline in broadcast network advertising revenues in 2009, spurred by the recession, has helped push Fox, NBC, ABC and CBS over the edge.
Fox's demand for $1 per subscriber per month - or more than three times the 30 cent fee reportedly offered by Time Warner Cable - sends a clear statement that broadcast TV no longer can thrive as free advertising-supported news and entertainment.
Even if Time Warner Cable and Fox split the difference and settle on at least a 50 cents per subscriber monthly retransmission fee, the die is cast.
The mostly unprofitable broadcast TV networks are hellbent on securing the dual revenue stream support enjoyed by the likes of TNT, TBS, and other cable networks. The free TV ride is over for consumers, who -- one way or another --will eventually pay for The Simpsons and all other endearing TV fare.
Consider the facts:
- CBS has leveraged its prime time ratings dominance this season to strong-arm higher retransmission fees from cable operators.
- ABC was quick to issue a statement of support for Fox, declaring that broadcast networks have the right to be compensated for their hit programming that contributes to the profitability of cable operators. Walt Disney, ABC's corporate parent, has historically been paid top dollar by cable operators for its ESPN, kids and family programming.
- NBC is expected to be converted into one or more cable networks when Comcast, the country's leading cable operator, takes controlling ownership of NBC Universal by 2011. It is unlikely NBC will be able to dig out from its fourth place prime time ratings hole given rapidly shifting industry economics.
- Fox's retransmission fee dispute with Time Warner Cable puts all of its branded cable networks at risk including FX, Speed, Fox Business News, Fox Soccer and its regional sports channels. Their carriage has traditionally been tied to the broadcast network. The Fox-Time Warner Cable stand-off will be repeated in the future involving other content networks and service providers.
- News Corp. chairman and CEO Rupert Murdoch is just the man to lead the charge. The maverick, who brought Fox onto the TV scene two decades ago funded partly by reverse compensation from TV station affiliates, is preparing to throw some of his major newspaper content (including The Wall Street Journal) behind a pay wall.
- The leading online video hub Hulu.com will soon begin charging consumers to access streams of some favorite TV programs available for free with limited advertising. Hulu is co-owned by Fox, NBC and ABC.
- Comcast and Time Warner Cable are launching TV Everywhere, which allows paid subscribers password access to cable shows on wireless mobile devices and PCs outside the home. The cable operators continue to raise subscriber fees and play-up their bundled cable TV, Internet and phone services.
Keepfoxon.com features a digital countdown to midnight Dec. 31 when its retransmission agreement with Time Warner Cable expires. Fox provides its rapid-fire version of the facts countering an aggressive advertising campaign waged by Time Warner Cable, claiming its subscribers are being "held hostage."
The proliferation of online video won't help all TV fans this time around since Fox has blocked Internet streams of its January Cotton Bowl, Sugar Bowl and other pro football games as well as a new season of American Idol. A sustained blackout of Fox programs on Time Warner Cable would be an opportunity for News to experiment with paid video-on-demand and other models,
Even if Fox and Time Warner Cable settle their differences in time for the holiday weekend, consumers beware. The bigger battle for viewer eyeballs and dollars rages on.