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Time Warner Cable, Fox negotiations near 11th hour

By Julianne Pepitone and David Goldman, staff writers


NEW YORK (CNNMoney.com) -- So long, Simon Cowell.

Time Warner Cable's customers could lose access to "American Idol," "the Simpsons" and some of the NFL playoffs if the cable company fails to resolve a fee standoff with Fox by Dec. 31.

"Oh, well...who cares what congress does, right? Time warner might not have fox programming anymore!!!!" said one Twitter user whose focus quickly switched from Thursday's health care vote.

The nation's second largest cable provider is at odds with Fox's parent company, News Corp., as well as the Weather Channel and Scripps Networks whose content licensing contracts with Time Warner Cable will expire at the end of the year.

Like all cable companies, Time Warner Cable pays fees to networks to air their content on cable subscribers' televisions. Cable providers usually negotiate multi-year contracts with the networks.

Time Warner Cable is arguing that the fees the networks want to charge it to renew the contracts are too high, while the networks say they have to raise their fees to cover escalating costs.

This year's negotiations between Time Warner Cable and News Corp. feature a new issue: Rupert Murdoch's media conglomerate wants to charge the cable company a fee for airing its broadcast station, Fox. Broadcast stations like NBC, ABC, CBS and Fox have traditionally been licensed to cable providers for free. Until now, providers have only paid for cable networks.

But networks are finding it increasingly difficult to turn a profit on their broadcast channels as programming choices are ever-expanding and advertisers are paying less. TV watchers can also get many of their favorite shows on the Internet from services like hulu.com, which offer Fox, NBC and ABC programs with very limited commercial interruptions.

Some companies are changing their strategies as a result. CBS (CBS, Fortune 500) and ABC's parent company Disney (DIS, Fortune 500) are reportedly in negotiations with Apple (AAPL, Fortune 500) to license streaming programming on the Apple TV product. NBC's parent company General Electric (GE, Fortune 500) recently announced a deal with No. 1 cable provider Comcast (CMCSA, Fortune 500) to hand over control of the broadcast station and its cable companies.

In a sign of the changing times, News Corp. says it wants $1 per subscriber for broadcast TV. The network claims $1 is a reasonable charge, given that is what Time Warner Cable pays for most cable stations, which receive lower average ratings than Fox.

Not all local Fox stations would be affected, because News Corp. does not own and operate all of the local affiliates. Time Warner Cable said its customers in New York, Los Angeles and Dallas would lose their local Fox stations as well as the national network broadcasts. Time Warner Cable has operations in some of the country's biggest TV markets, including the southern California, New York state, Ohio, the Carolinas and Texas.

A public battle

The fight went public last month, when Time Warner Cable (TWC) and News Corp. (NWS, Fortune 500), began airing commercials and launched Web sites to convince viewers that the other party was acting unreasonably.

On its Web site rolloverorgettough.com, Time Warner Cable claims some networks are demanding up to a 300% price increase, which will make the cable provider hike prices "significantly" for its customers to cover the costs. News Corp. countered that Time Warner Cable is a highly profitable company, and "it can surely afford to fairly compensate broadcasters for that content without raising rates," according to a posting on its Web site keepfoxon.com.

Time Warner Cable paid more than $3 billion in licensing fees to networks in the first nine months of 2009, up 7% from the same period in 2008, the company said in a financial statement. The cable company had an operating income of $4.7 billion this year through the end of September.

The other networks that are negotiating with Time Warner Cable haven't been as vocal as Fox, but remain in a standoff with the cable provider as well.

If the stalemate is not resolved at the end of next week, the company's 13 million cable TV customers could lose the right to view News Corp.'s Fox and FX; Scripps' Food Network; and the Weather Channel.

That's not sitting well with many consumers on the blogosphere.

"I'd die w/o fox!" said one Twitter user on Thursday who urged followers to call Time Warner Cable to complain. "I find it weird that time warner might be dumping all fox networks. I don't watch Idol, but ppl who do will b mad when they dont have it," said another.

But many bloggers sided with Time Warner Cable.

"Sorry Fox -- Time Warner Cable Subs Say Take a Hike!" one Twitter user posted. "You go Time Warner!" another said.

Others were looking to alternatives: "Fox and Time Warner are having a pissing contest..... thank God for Dish Network!"

Losing Fox a 'very likely possibility'

Time Warner Cable said on its Web site that in the event of a prolonged standoff, it would try to convince the networks to allow the company to continue airing their programming while negotiations are ongoing. But the networks are under no obligation to do so.

A Fox spokesman said it is prepared to extend negotiations beyond the Dec. 31 deadline to get "fair compensation for the impressive value our Fox programming offers," but the Fox signal will drop for Time Warner subscribers if a deal is not reached by the new year.

"While negotiations are ongoing, we have a responsibility to prepare our viewers for the very likely possibility that Time Warner Cable may choose to no longer carry Fox Broadcasting, Fox Cable and Fox regional sports programming," the spokesman said.

A Time Warner Cable spokeswoman said negotiations with Fox are ongoing but that its current demands are "unreasonable and excessive," especially in this economic climate.

"We hope Fox won't punish our customers by taking their programming away," the spokeswoman said.

Issues over licensing fees are not uncommon at the end of the year, when networks' contracts expire -- nor are public ads that try to sway customers. Last year, Time Warner Cable and Viacom were engaged in a similar battle. As the battle raged on, Viacom (VIA), which owns MTV, Comedy Central and Nickelodeon, ran an ad that featured Dora the Explorer in tears: "Why is Dora crying?" the Dec. 31, 2008 ad said, "Time Warner Cable is taking Dora off the air tonight along with 19 of your favorite channels." The two parties eventually reached an agreement in the early hours of Jan. 1.

It's unlikely that the contract will not be resolved, since neither company would benefit; Time Warner Cable subscribers would be annoyed to lose their programming, and the networks would lose 13 million viewers. That would be especially damaging for Fox, which is set to air highly rated shows like "American Idol" and the NFL football playoffs in January.  To top of page

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