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Fox Playing Hardball With Balky Affils

While the network says recent affiliation changes aren’t ultimatums and that it needs a revenue stream from its stations, others see Fox’s increasingly tough stance as one of “either come to the table and negotiate or we’re going to slit your throats.”

Fox Networks’ new affiliation deals in Evansville, Ind., and Boise, Idaho, reflect the evolving business model for network television, not a warning shot across the bow of recalcitrant affiliates, says a Fox executive.

“It was not to send a message” to other affiliates, said the executive, who spoke on the condition of remaining anonymous. “If we can’t come to an agreement with someone, we have to look at something else. … We needed to look at where we could affiliate and that’s what we did.”

Fox said Wednesday that it was pulling its affiliation from Nexstar Broadcasting’s WTVW Evansville and handing it over to Communications Corp. of America’s WEVV, which will carry Fox on a digital channel along with programming from MNT. WEVV carries CBS on its primary channel.

In Boise, Fox is replacing Block Communications’ KTRV with Journal Broadcast Group’s KNIN, which will carry Fox on its primary channel in place of the CW. The affiliation switch will happen around Sept. 1, said Jim Thomas, a Journal spokesperson.

“Teaming with Fox in Boise will be a tremendous complement to the syndicated  programing we have on station,” Thomas said, adding that Journal also owns the ABC affiliate in that market. “The same newsroom will produce news programming for” both stations.

The agreements bring CCA’s Fox affiliations to seven, Journal’s to three.

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Executives of Nexstar, CCA and Block could not be reached for comment.

Having watched the retransmission consent payments from cable and satellite operators grow into a substantial new revenue stream for affiliates, the Big Four networks, with Fox in the lead, have been demanding big cuts when affiliation agreements come up for renewal.

Nexstar President and CEO Perry Sook, a leader in negotiating retransmission fees from MPVD providers, and Fox have been in affiliation negotiations for nearly a year. Wednesday, during Nexstar’s first-quarter earnings conference call, Sook acknowledged that there’s been no progress in the negotiations.

That led some observers to see Fox’s announcement of the move in Evansville as making an example of Sook.

“Fox has been looking to sort of flex their muscles, show they mean business and decided they would pick on two groups they haven’t been able to get a deal with yet,” said a broker familiar with the situation.

“My take is the Fox people said we told you we were going to do this and now we’re doing this: Either come to the table and negotiate or we’re going to slit your throats.”

While the Fox executive took exception to that characterization, he acknowledged that network-affiliate relations are strained.

“I would say it’s a challenging time,” he said. “We’ve got affiliates trying to figure out ways to make things work in the future. We want to help them figure that out. … Our goal is to keep affiliates right where they are. We like the affiliate body right now. But we have to acknowledge the financial realities the network is dealing with. We want to balance that out as soon as possible.”

Along with the other Big 4 networks, Fox considers the traditional single-stream, advertising-based network business model no longer tenable and seeks a second stream from affiliates, the executive said.

The strain between Fox and its affiliates came to light earlier this year as Fox affiliate board President Brian Brady and Mike Hopkins, president of affiliate sales and marketing for Fox Networks, drew battle lines in dueling letters to affiliates.

According to sources, Fox was seeking four-year affiliation agreements that included 25 cents on every retrans dollar a station collected in the first year, ratcheting up to 50 cents in the fourth year.

Brady’s letter warned that Fox was attempting a divide-and-conquer strategy by negotiating agreements with stations and groups separately, effectively abandoning board-level talks.

Hopkins, in his response, tacitly acknowledged that, saying that board talks had been unsuccessful and that the network would instead negotiate with stations and groups independently. If those talks failed to yield results, Fox would have no choice to explore other means of distribution, Hopkins’ letter said.

Fox, the No. 1 rated network in the key 18-49 demo, clearly is trying use its leverage to extract more revenue from its affiliates, said a Wall Street source.

“I think [News Corp. COO] Chase Carey is saying it’s our game, you’re along for the ride,” the source said. “Chase is going to take his cues from Rupert and Rupert is not afraid to play hardball with anyone, not the unions in London, not affiliates.

“What that says to me is that as a station owner, you have to take back as much of  your dayparts as you can, program your station accordingly and develop alternate revenue streams. You need to find ways to be less dependent on network owners.”

One broadcasting executive said that while Fox may be right about the fading utility of the single-stream revenue model for networks, it may be pushing too hard, too fast.

“After they get over the chest pounding, they’ll get down to the reality that it’s not going to do any good to have bankrupt affiliated stations that aren’t differentiated from youtube channels” the executive said.

The key to successful network-affiliate relations will be blending highly rated network programming with strong local programming, the executive said.

While the executive doubts Fox will attempt to force the issue with affiliates in larger markets, the Fox executive didn’t rule out that possibility.


Comments (33)

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Robert Klein says:

May 11, 2011 at 7:28 pm

Correction: WEVV 44 is the CBS affiliate in Evansville. They carry MNT on 44.2. So where exactly is Fox going? 44.3? Or is MNT being evicted from 44.2? Confusing details here…

    Robert Klein says:

    May 11, 2011 at 7:49 pm

    WTVW is surprisingly silent on this. Both their website and Facebook pages say nothing about it. WEVV posted a press release on FB and on their web site (though you’d miss it if you didn’t look hard enough). Fox will share with MNT on 44.2. No date given as to when this change is supposed to happen.

    Kathryn Miller says:

    May 11, 2011 at 7:53 pm

    Who the heck would keep MNT instead of FOX?

    Robert Klein says:

    May 11, 2011 at 9:31 pm

    Considering MNT is owned by Fox, Fox will make sure it’s kept.

Diane Ruehl says:

May 11, 2011 at 7:35 pm

Fox is also shopping cable direct opportunities in other markets at this moment. Retrans greed comes back to haunt.

Carol Thompson says:

May 11, 2011 at 8:02 pm

The date of the switch is July 1. Fox sent me a press release this afternoon. And as LA213 suggests, Fox programming will share space with MNT. As I understand it (per WEVV’s GM), Fox programming will air in primetime (7-9PM CT) and MNT is getting shifted to 9-11PM CT.

Andrea Rader says:

May 11, 2011 at 8:06 pm

FOX programming will be cleared live on WEVV’s .2 subchannel while the existing MNT programming will be delayed.

FOX has for many years shown a lack of good faith in its dealings with affiliates. These “warning shots” are simply the latest salvo in this longstanding dispute. If I were a non-O&O FOX affiliate I would be weighing my options in the very near future.

    Wagner Pereira says:

    May 11, 2011 at 8:49 pm

    It’s not just FOX. ABC has approached several of the larger companies with ABC Affiliation over the past 18 months about moving the full ABC lineup to their .2 signal in MUCH larger markets than the DMA 100+ listed in this story. Thus far, no on has taken them up on it, not wanting to open up Pandora’s Box.

Clayton Mowry says:

May 11, 2011 at 10:20 pm

FOX controls MyNet, why would they accept at DT-2 for a FOX affiliation, that is like putting ESPN Classic on over ESPN 1, They are going a long way and degrading themselves to prove a point that they can take affiliations. Small markets, watch out!

Steven Mendel says:

May 11, 2011 at 11:04 pm

Shame on ComCorp and Journal for opening this Pandora’s Box. Just watch out because they may find it comes back to haunt them with some of their other markets.

Darin Hall says:

May 11, 2011 at 11:12 pm

it’s about time someone put Perry in his place. we all knew retrans would come back to bite him in the butt one day. Don’t get me wrong… the cable companies should not have a free ride… not at all! but the retrans payment should be based on the amount of local programing the station offers… everyone know nexstar offers very little local quality programming.

    Andrea Rader says:

    May 12, 2011 at 2:30 am

    If Perry is put in his place, all other station owners will be, too. I’m not a fan of everything he does (*cough*Wilkes-Barre/Scranton*cough) but he’s in the right here. WTVW programs 30 hours of local news per week, not too shabby for market #103. And Nexstar runs the top-rated news station in Salt Lake City. So tell me again about what “everyone knows”.

michelle maranges says:

May 12, 2011 at 8:56 am

It is likely that FOX will air in pattern on 44.2 and MNTV will be tape delayed

Janet Frankston Lorin says:

May 12, 2011 at 11:26 am

Honestly, all networks and stations should pay a small fee to Perry Sook. If he hadn’t had the balls to take a stand when he did, retrans would not exist. Period! Fox is trying to kill the goose that laid the golden egg.

John McElfresh says:

May 12, 2011 at 12:05 pm

Am I the first to say, “Shame on Journal and ComCorp.” Their Mother should have told them, “Don’t play with FOX, they are not nice people.”

    John McElfresh says:

    May 12, 2011 at 12:07 pm

    Sorry NEWOWNER, I missed your post! It will come back to bite them!

STEVEN HERBERG says:

May 12, 2011 at 12:29 pm

Hey, business is business and I suggest that Mr. Sook will be the first to say it.

Mike Henry says:

May 12, 2011 at 12:43 pm

KTRV claims that it on board with the terms and conditions of Fox’s retrans sharing plan; even though the station had been operating as a Fox affiliate w/o an agreement, I’m wondering if this could be grounds for Block Communications to sue Fox for stripping its affiliation as a new agreement was immediately pending. Fox loses on this one as it is moving its affiiations to stations that don’t produce their own newscasts (WEVV can’t produce news for it since it has had no news operation for 10 years, and KNIN has its news outsourced to co-owned KIVI, and no ABC, NBC or CBS station is willing to simulcast their news with a Fox station, just a relatively bare bones amount of news each week). KTRV and WTVW have news divisions, which Fox wanted more of its affiliates to have following the affiliation free-for-all they made between 1994-96 (why do you think one of the last times they got a DT1 affiliation, was with an NBC station (KBTV) with a news operation). If Fox strips affiliations as a bullying tactic for affiliates who don’t agree to their retrans sharing plan, it is going to get the FCC’s attention, and they may end up in some hot water for it. If Fox chooses to strip other stations’ affiliations with the network, they should have the sense to get DT1 affiliations on stations with a news operation that offers morning, early and late evening newscasts, because the network has too many stations that outsource news as it is. KTRV and WTVW could become CW affiliates, and keep running the same amount of news they do now (which would be good, since almost no CW stations outside of Tribune’s produce their own news), WTVW could also try to take the CBS affiliation from WEVV (maybe a bit of an “up yours” to Fox for moving its affiliation to a digital subchannel on that station). Ultimately, if Fox drops affiliations with other affiliates, it could hurt them with their future NFL and MLB broadcast contract negotiations, having its affiliates ending up on lower-rated stations; and if they just take affiliations with stations that have their local news outsourced, than they will be no better than a CW or MyNetworkTV affiliates in that arena; other networks might also move their affiliations to other stations or launch cable-only affiliates (a la some CW and MNT affiliates), if they are at an impasse with affiliates over divvying up retrans, possibly risking the future of local TV.

    Kathryn Miller says:

    May 12, 2011 at 12:51 pm

    I was wondering why no one addressed the Fox/news issue. ISTR that Fox did give stations 2-3 years to implement news in the mid-1990’s. One wonders if news is essential them now, or how long these new affliates will have to implement local news.

    Diane Tryneski says:

    May 12, 2011 at 3:48 pm

    Seems ironic that Nexstar was targeted since they were the ones who switched KBTV from NBC to FOX.

Mike Henry says:

May 12, 2011 at 3:46 pm

KNIN has a 9 p.m. newscast produced by sister station KIVI, and ComCorp is unlikely to shell out cash to start a news operation for WEVV or its My Fox 44 subchannel, given that only two stations owned by the company produce local news on their own and several others have their news hubbed out by NBC station KETK in Tyler, Texas (not to mention the ComCorp group has been in strapped for cash for a while, even going bankrupt at least once). KIVI is unlikely to use a “Hawaii News Now”/”Indiana’s NewsCenter”-type format for KNIN’s newscasts, although as syndicated programming gets more expensive to acquire and local programming becomes a bit more prominent on TV, at some point in the distant future such a part-simulcast/part-exclusive format may be used between Big Three stations and Fox affiliates, where the Big Three station’s morning, early and late evening newscasts are carried on both stations and the Fox station carries an extension of the morning news to 8 or 9 a.m. and a primetime newscast, along with the simulcasted newscasts.

matt fess says:

May 12, 2011 at 4:46 pm

Its just rather sad. Divorces over money are just sad to see. As an industry right now, we need to work together to compete and grow. It has been proven that the network and the affiliates need each other to really succeed. A shame something could not have gotten worked out here. FOX and Nexstar are both successful and have been through lots. They should have gotten it done.

Owen Simon says:

May 12, 2011 at 4:47 pm

When you’re in a partnership with Fox, you’re the junior partner!

    Kathryn Miller says:

    May 12, 2011 at 5:31 pm

    It might be interesting to hear of a network where the affiliates (or any affiliate) isn’t a junior partner. I guess that ABC/McGraw-Hill might qualify, at least up to a few years ago.

    Owen Simon says:

    May 12, 2011 at 5:57 pm

    The original quote is……. “When you make a deal with the devil, you’re the junior partner.” Dick Armey.

Cheryl Davis says:

May 12, 2011 at 4:54 pm

I would bet on Perry Sook for this fight! The Thrilla in Retransilla!

Barb Palser says:

May 12, 2011 at 4:55 pm

The business world is round. Stay tuned FOX….

bart meyers says:

May 12, 2011 at 8:54 pm

If it wasn’t for Perry Sook to be the first broadcast company owner to stand up to the cable companies and get cash for retrans, no one would be getting any retrans money. It took some balls and a strong backbone to be the first, I can tell you that. You’d think FOX would have given Perry some leeway and respect under those circumstances when it came to the affiliate negotiation in Evansville. That’s a strong performing station that airs a ton of news. The people who work there deserve a much better deal than this. Is it too late?

    Andrea Rader says:

    May 13, 2011 at 8:34 am

    The deal is done, I’m afraid. As for Perry, you can always tell the pioneers from the arrows in their back.

Don Richards says:

May 13, 2011 at 9:23 am

There’s no such thing as a partnership with Fox. They are the feudal lord and we are the serfs. We exist at their pleasure. Fox will eventually throw all of their affiliates under the bus and move their distribution model to cable, satellite and the internet. They’ll keep 100% of the fees, 100% of the inventory and they won’t have to endure diatribes from unhappy affiliates. There’s no incentive for Lord Fox to speak with the serfs.

    Robert Klein says:

    May 13, 2011 at 9:46 pm

    I hope they do move to cable and out of OTA broadcasting. They’ve systematically destroyed KTTV and KCOP in Los Angeles, IMO. Never watch either anymore. Since I only receive OTA television, I won’t miss them.

Janet Frankston Lorin says:

May 13, 2011 at 12:39 pm

I just can’t respect any person or company who forgets who put them where they are. Who can forget just a few years ago when FOX was waiving cash and begging stations to abandon their networks and join them. Many took large gambles to do that. Now FOX is ready to put a stake through their collective hearts!

Jeff Baenen says:

May 13, 2011 at 1:49 pm

The thing that amazes me most is that the “Fox executive” requested anonymity(?!) These guys have been all thumbs in handling this issue with the press.


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