The latest wrinkle in the retrans war is that Time Warner Cable systems can pick up Fox primetime and sports programming if they are denied carriage of the local Fox affiliate. It would appear to undermine the retrans efforts of affiliates, but the network maintains that it really wants to help the affiliates by getting TWC to pick up a "cooling off feed" that comprises the entire affiliate signal for a year. Affiliates are skeptical. Some see it as parternalistic meddling. Others simply aren't sure what Fox’s intentions are and what the Fox-TWC agreement will mean to their future retrans earnings.
Fox Affils Not Cool With ‘Cooling Off Feed’
On its face, Fox’s retrans “insurance feed” arrangement with Time Warner Cable is a terrible one for Fox affiliates, undermining their ability to earn a fair retrans dollar (or two bits, four bits, six bits, whatever).
The deal says that if TWC gets into a retrans scrap that causes a Fox affiliate to pull its programming, TWC can bypass the affiliate and get the programming directly from Fox, perhaps building an entire fugazi Fox affiliate around it.
This came to light last week in the running and very public retrans battle between TWC and Sinclair, whose current deal runs out at the end of this month. TWC is telling subscribers that if the Sinclair channels disappear not to worry because it has access to a Fox “insurance feed” that will allow them to carry Glee, House and all the other swell Fox primetime shows.
The feed won’t come cheap — at least 70 cents per sub per month, I’m told. But for TWC it would be better than facing hordes of disappointed subscribers especially around Super Bowl time.
As I said, the availability of the insurance feed would seem to undermine the retrans leverage of the Fox affiliate. If TWC doesn’t have to worry about losing the Fox shows, its leverage in retrans negotiations is greatly enhanced. At best, that means less dough for affiliates. As worse, it means no dough.
When news of the feed broke, affiliates were rightly alarmed: Here’s Fox screwing up our retrans dealings as the same time it’s squeezing us for a hefty share of whatever retrans revenue we are getting.
But there is apparently more to the story. According to the affiliates with whom I spoke, Fox is now telling them that they are trying to help, not hurt. The way the deal is written, Fox says, TWC has the option of getting the Fox programming by restoring the Fox affiliate for a year, assuming the affiliate gives its OK. Fox would collect the 70 cents or so from TWC and split it with the affiliate.
Fox spokesman Scott Grogin confirmed the reports, pointing out that during the year the affiliates would be able to continue negotiating a permanent deal without losing the ad revenue that results from coming off a cable system. It’s not an “insurance feed,” he said, it’s a “cooling off feed.”
This all sounds a lot better, but the affiliates are still wary of the whole matter. They’re not sure that they want Fox in the middle of their negotiations with cable operators, seeing it as unwanted paternalism. Plus, some point out, they are not sure dealing with Fox for a fair share of the 70 cents would be any easier than dealing with TWC on a long-term agreement.
But mostly affiliates are just confused. They are not sure what Fox’s real intentions are and what the Fox-TWC agreement will mean to their future retrans earnings. I would say the affiliate relations people at Fox have some work to do over the holidays.
Barry Faber, the point man on Sinclair’s effort to cut a deal with TWC before New Year’s Day, says that he is “not inclined” to give permission to Fox to offer the cooling off feed. He won’t say why, but my presumption is that he doesn’t like the split Fox is offering.
And, oh, by the way, Faber says it’s his understanding that TWC doesn’t want that option anyway. It just wants the Fox network programming. Go figure.
Despite the availability of the insurance feed, Faber seems to be pretty confident that he can still cut a good deal for Sinclair. He believes that it’s not the network programming alone that makes his affiliates worth what he asking in retrans fees, but the entire broadcast day, syndicated programming and local news included.
That’s a great theory, but I wouldn’t bet the company on it. Sure, a lot of people will be unhappy to lose their Fox affiliate in its entirely. But what really brings the pressure on cable operators to open their purses is subscribers screaming about the loss of network programming.
When things start getting nasty, you want the gleeks on your side.
********** ********** ********** ********** ********** ********** ********** ********** ********** ********** **********
If any Washington policymaker still believes that cable operators are victims in retransmission consent, he or she ought to look at what’s going up up north.
After five years of trying to squeeze a little money out of Time Warner Cable, Smith Media finally had enough and ordered its three network affiliates in Utica, N.Y., and Burlington, Vt., off the TWC’s area cable system Wednesday night.
Time Warner didn’t fool around. It imported affiliates from other markets 200 miles away. It customers in Utica were treated to news and weather from Scranton and Wilkes Barre, Pa. Those in Burlington got the news from Utica.
There’s a lot wrong with these tactics. First off, TWC apparently never got permission from at least two of the three stations it was importing, both owned by Nexstar. Nexstar CEO Perry Sook says he has sent cease-and-desist letters to TWC.
If Sook is speaking truth (I believe he is) and his lawyers are smart (I believe they are), then TWC is misleading the public with its statement that it “made alternative arrangements” to import the distant signals. To me, the phrase “made alternative arrangement” implies that they did thing properly, that they didn’t just go out and grab the signals without permission.
And as Smith Media CEO Mike Granados told me, the moves are an affront to the TWC subscribers who deserve to get the hometown news along with the NBC, ABC and Fox programming.
But what would you expect from a company that refers to its customers as “revenue generating units?”