Cablevision Makes New Offer to Fox

The Wall Street Journal

 

Cablevision Systems Corp., attempting to end a TV-station blackout over a contract dispute, proposed paying News Corp. the same rate that Time Warner Cable Inc. pays the media giant for local Fox affiliates in New York and Philadelphia.

News Corp., which owns Fox television networks, rejected the offer, calling it "yet another in a long line of publicity stunts" by Cablevision.

The programming blackout, now in its 12th day, is threatening to deprive 3 million households in the New York Metropolitan region of the World Series Wednesday night—a prospect that would lead to more public outcry against both companies.

In a news release, Cablevision said that for one year it would pay the rate Fox charges Time Warner Cable for carrying the local affiliates in New York and Philadelphia.

"This is higher than the rate we pay any other New York broadcast station," Cablevision said. "This solution is in the best interest of not only baseball fans but of all Cablevision customers and Fox viewers."

News Corp. said it remains committed to negotiating a fair deal, but Cablevision's "incomplete proposal is not acceptable." The media giant added that "Cablevision is seeking a discounted 'package rate' without buying the entire package."

News Corp. said it is willing to negotiate a deal "based on an entire suite of channels" under the terms it reached with Time Warner Cable and other providers, or a stand-alone agreement for three local broadcast Fox affiliates.

The blackout for Cablevision customers included the main Fox station in the New York area, as well as a smaller station, the Fox station in Philadelphia and other cable networks owned by News Corp., such as Nat Geo Wild and Fox Deportes, a Spanish-language sports service. Fox News is unaffected because it is part of a separate contract.

Cablevision responded to Fox's rejection by renewing its plea for intervention by the Federal Communications Commission.

"It is now clear beyond a shadow of a doubt that News Corp. is operating in bad faith," Cablevision spokesman Charles Schueler said. "We call on the FCC to intervene immediately to restore the Fox signals to Cablevision's 3 million homes and order News Corp. to agree to binding arbitration to resolve this conflict."

Cablevision has said it already pays News Corp. more than $70 million a year for its channels and that News Corp. is demanding more than $150 million a year for the same programming--a claim that News Corp. said is "simply not true."

Cablevision also has said it has agreements with every other major broadcast station, including CBS, NBC, ABC and Univision, but News Corp. is asking for more in fees for the two New York stations—FOX 5 and My9—than Cablevision pays for all of the other broadcast stations combined.

By offering to match the rate paid by Time Warner Cable, which reached a multiyear agreement with News Corp. early this year in a dispute that avoided programming blackouts, Cablevision appears to be moving off its previous negotiating stance. Still, the extent of any concessions is unclear, because most major distribution deals between media companies and distributors like this run for several years and include guaranteed fee increases over time among other provisions.

A Time Warner Cable spokesman declined to comment on that company's deal with News Corp. and the value of Cablevision's offer.

News Corp. is believed to be under pressure to reach a deal with Cablevision on at least the same terms as the one with Time Warner Cable. If it is unable to do so, News Corp. likely would have to make concessions to Time Warner Cable, based on that deal's terms.

Last year, Cablevision delayed by one year a contract negotiation with News Corp. for its Fox stations that could have affected broadcasts of a World Series eventually won the New York Yankees, a home team in Cablevision's main market. The delay allowed Time Warner Cable to negotiate its deal with News Corp. first, setting a new standard for payments for its broadcast signals. This year, the Yankees didn't make the World Series, taking some pressure off Cablevision.

The resulting dispute has left about 3 million homes, largely in the New York area, without access to their local Fox affiliate and major sports events, such as National Football League games and Major League Baseball's National League Championship Series last week. Fox is broadcasting the first game of the World Series between the Texas Rangers and San Francisco Giants on Wednesday.

Fox-Cablevision Dispute threatens MLB Broadcasts

The Associated Press

News Corp.'s Fox pulled its channels off Cablevision early Saturday after the companies' programming deal expired and negotiations for a new one stalled, threatening broadcasts of baseball playoffs for some 3 million Cablevision subscribers in New York and Philadelphia.

The blackout affects Fox 5 and My9 in New York and Fox29 in Philadelphia. Subscribers also lose access to cable channels Fox Business Network, NatGeo Wild and Fox Deportes.

The channels went dark when the programming deal expired just after midnight Friday. Such deals spell out how much a cable TV system pays the broadcaster to carry its signals over the cable lineup.

The impasse means the subscribers, mostly in the New York area but also in Philadelphia, could lose access to Game 1 of Major League Baseball's National League Championship Series, when the Phillies take the field against the Giants on Saturday night.

Cablevision called on News Corp. to put Fox5 and My9 back on Cablevision immediately and submit to binding arbitration under a neutral third party.

"News Corp.'s decision to remove Fox programming from 3 million Cablevision households is a black eye for broadcast television in America," Cablevision spokesman Charles Schueler said.

Fox released a statement blaming Cablevision for the impasse.

"In an effort to avoid this very situation, we started this process in May and made numerous reasonable proposals to Cablevision," said Mike Hopkins, president of Fox Networks Affiliate Sales and Marketing. "However, we remain far apart and Cablevision has made it clear that they do not share our view regarding the value of Fox's networks."

In separate fee disputes this year, Cablevision customers have experienced brief blackouts of The Walt Disney Co.'s ABC broadcast signal and Scripps Networks Interactive Inc.'s Food Network and HGTV. Subscribers missed the first 15 minutes of the Oscars in the ABC dispute.

Cablevision Systems Corp. has said News Corp.'s Fox is making "outrageous fee demands" for the right to carry the signals of the three cable channels and three TV stations.

Cablevision says it pays $70 million a year for access to 12 Fox channels, including those in dispute, and that News Corp. is now asking for more than $150 million a year for the same programming. It said Thursday that it is willing to submit to binding arbitration and called on Fox not to pull the plug.

Fox rejected the call for arbitration, saying the process would "reward Cablevision for refusing to negotiate fairly."

"Direct business-to-business negotiation is the only way to resolve this issue," it said in a statement.

While Fox didn't dispute Cablevision's claims, it called Cablevision "hypocritical" because it pays more for two of its sister company channels, MSG and MSG Plus, than it does for all 12 Fox channels. MSG and MSG Plus are owned by Madison Square Garden Inc., which like Cablevision is controlled by the Dolan family.

Lawmakers have begun to speak up on the issue, including Rep. Steve Israel, D-N.Y., and Rep. Peter King, R-N.Y., who called for arbitration so viewers wouldn't have their TV programming disrupted.

Israel said in a statement Friday that he had asked the Federal Communications Commission to intervene in the dispute.

The FCC encouraged the two parties to agree to binding arbitration without suspending service and did not specify a mediator, according to Jack Pratt, a spokesman for the Long Island congressman.

Sen. Frank Lautenberg, D-N.J., had urged both sides to extend negotiations.

"New Jersey consumers do not deserve to be treated as pawns in this dispute," he said in a statement.

Rebecca Arbogast, a managing director at brokerage Stifel Nicolaus, said News Corp. and other broadcast company owners risk political intervention if they keep pushing carriage deals to the brink.

"The more that programming disputes escalate and signals get pulled ... the more pressure we believe there will be on the (Federal Communications Commission) and Congress to do something to prevent such consumer disruptions," she wrote in a research note Thursday.

In a separate dispute with satellite TV company Dish Network Corp., Fox cut access on Oct. 1 to 19 regional sports networks, FX and the National Geographic Channel for some 14.3 million Dish subscribers. That fight foreshadows more tough negotiations, as the deal for Fox broadcast signals on Dish expires Oct. 31.

Saudi Prince to Launch News Network in Partnership with FOX

The Canadian Press

 

RIYADH, Saudi Arabia — The Kingdom Holding company, headed by Saudi billionaire Prince Alwaleed bin Talal, says it plans to launch a new Arabic television news channel in partnership with the Fox network.

In a statement Tuesday, Prince Alwaleed says the 24-hour broadcast channel "will be an addition and alternative" to Al-Arabiya and Al-Jazeera.

He named veteran Saudi journalist Jamal Khashoggi chief of the new network.

He did not say when the network would begin broadcasting.

Alwaleed was ranked last year by Forbes as the world's 19th wealthiest person. He also owns the Arabic media giant Rotana Group.

In February, Fox said it was becoming a partner with Rotana by taking over 9.1 per cent of its shares.

Ask a Stupid Question . . .

Gawker

Fox news anchor asks the internet: 'am I dumb?'

 

Fox News' Greta Van Susteren received an email from a viewer, "Brian," saying that her "brain is empty." Naturally, she started a poll on her blog: "Who is dumber? Greta, or Brian." Guess who's winning.

Van Susteren, the network's resident weird Scientologist, is an experienced blogger who knows that the best way to deal with personal slights is to blog about them extensively. So when she received an insulting email from viewer "Brian" of "Tahlequah, OK," she posted it without hesitation:

    Greta,
    You got that right, you have a mind like a seive. Your brain is empty.
    Matter of fact, it is so empty, if you put a pea in your skull it would rattle around like a BB in a boxcar. You said it, gal, not me, but I sure do agree with you. A true blonde.
    Brian ***
    Tahlequah, OK
    PS How do you get that cush job, anyway?

What Greta seems to have forgotten is that while the internet is a great place to air grievances, it is not a great place to find personal validation. In fact, it is the actual worst place to find personal validation. Especially in poll form:

 

Can you guess how this is going for Greta? If you have been on the internet before, even for five minutes, you may have a clue.

 

Obviously, as a professional blogger, I took the poll very seriously and weighed the evidence carefully: On the one hand, "Brian" doesn't know how to spell the word "sieve." On the other hand, Greta actually made a poll asking if she was dumber than a guy who wrote her an email.

I voted for Greta, in the hopes that they will replace her. I look forward to On the Record with Brian from Tahlequah.

Coco Inks new Deal with TBS

NY Times

 

In a move that qualifies as a shocker, Conan O’Brien has made a deal to return to television in a new late-night show on cable — not network — television.

The former “Tonight Show” host has agreed to start a new show on TBS, the comedy-oriented cable channel in the Turner network lineup. The show will start in November and play at 11 p.m. four nights a week (Monday through Thursday), teamed with that network’s other late-night show, hosted by George Lopez. That show, now at 11, will slide to midnight.

The news comes as a stunner because Mr. O’Brien was known to be in talks with the Fox network, and most predictions had him moving there in September or January.

TBS was not known to be in the picture. But Mr. O’Brien’s representatives had been quietly talking with that cable network as issues continued to arise with the potential Fox deal.

The move will surely be closely examined for its implications for the future of broadcast vs. cable television, with one of the biggest stars of recent years in network television abandoning that side for cable.

In a release accompanying the announcement Mr. O’Brien said: “In three months I’ve gone from network television to Twitter to performing live in theaters, and now I’m headed to basic cable. My plan is working perfectly.”

Mr. O’Brien begins his live concert tour in Eugene, Ore.,  Monday night.

In the statement, Steve Koonin, the president of Turner Entertainment Networks, emphasized the change from network to cable.

“For decades, late-night TV has been dominated by broadcast television,” Mr. Koonin said.  “Now, with a young audience and a growing late-night lineup, TBS is set to be the choice of comedy fans for years to come.”

Fox is Number One. At Indecency Complaints.

ABC News

LOS ANGELES (Hollywood Reporter) - Members of the "tea party" don't like MSNBC's Rachel Maddow's use of the word "teabagging."

According to FCC records obtained and analyzed by SNL Kagan, viewers have filed 1,239 indecency complaints connected to the ambiguous phrase. The only thing more controversial was a rant delivered by CNN's Jack Cafferty against China on an April 2008 edition of "The Situation Room."

Of course, NBC and CNN don't even come close to the amount of ire directed at a March 2009 episode of Fox's "Family Guy" in which a baby drank horse semen with his breakfast cereal. That episode generated 188,368 complaints.

Thanks in large part to "Family Guy" and some of its live sports programing, Fox leads all broadcast networks in getting under the skins of Americans. Almost 50% of the top 50 broadcast TV indecency complaints filed at the FCC were directed at Fox.

James Cameron: Fox Didn't Want Avatar's 'Tree-Hugging Crap'

USA Today

Filmmaker James Cameron has spoken before about how his Avatar is a cautionary environmental tale. In a MTV interview this week, he says Fox wanted to remove its "treehugging crap," but environmentalists now want to create a curriculum based on it.

Cameron says he didn't initally pitch Avatar, which depicts a world of stunning beauty that's threatened with destruction, as an ecological warning. So Fox Studio executives were taken aback:

    When they read it, they sort of said, 'Can we take some of this tree-hugging, FernGully crap out of this movie?' And I said, 'No, because that's why I'm making the film.'

Cameron says Avatar doesn't provide facts about the planet's future, but its "eye candy" aims to jostle viewers out of their environmental "denial" and motivate them to work for change.

    Denial is a mental response based on fear... You have to fight an emotional response with an emotional response....

    If you're tuned in to what's happening in Avatar, you start to feel a sense of moral outrage when you see the tree fall [destroying the Na'vi's home], and it's a compassionate response for these people

    Then you feel a sense of uplift at the end as good vanquishes evil. If you put those two things together, it actually creates a ripe emotional matrix for people to want to do something about it.

Cameron says the film's had quite an impact so far:

    We're getting a tremendous amount of feedback from environmental groups, from people with specific causes," Cameron said, "whether it's indigenous people being displaced by companies to do mining or to do oil drilling, or if it's environmental groups saying, 'Let's do some curriculum around Avatar. ' "

NBC Needs To Redefine Itself After Leno Experiment

USA Today

PASADENA, Calif. — TV's late shift is shifting again, and in a way that could retool a television institution, The Tonight Show.

On Sunday, NBC confirmed what was Hollywood's hottest rumor all weekend: The network is dropping The Jay Leno Show from its prime-time lineup after his Feb. 11 show. The former Tonight Show host will return to late night on March 1, after NBC's coverage of the Winter Olympics, in a half-hour format in his old perch at 11:35 p.m. ET/PT. The Tonight Show, now hosted by Conan O'Brien, would move from the after-news slot it has occupied since the '60s to after midnight: 12:05 a.m. ET/PT.

NBC's shift marks a quick end to a five-month experiment that the network heralded as a new way to program prime-time television: by positioning Leno's topical, relatively inexpensive-to-produce show as a lead-in to local newscasts. But Leno's mediocre ratings drew complaints from affiliates and helped fuel the latest drama to beset the struggling fourth-place network. The network unraveled a risky move aimed not only at cutting costs but also at keeping Leno from defecting to another network after NBC anointed O'Brien as his successor on The Tonight Show.

Leno's return to late night throws into question the future complexion of the legendary Tonight Show— at 55, one of the longest-running shows on television — as well as the future of its new host, O'Brien.

O'Brien now faces a difficult choice: Does he stay at the network that promised five years ago he'd get the primary late-night slot? Or does he bolt for another network and collect an eight-figure penalty NBC would face for reneging on his Tonight Show deal?

If O'Brien bolts, The Tonight Show would return to a format viewers saw for 17 years: an hour-long show with Leno as host, starting at 11:35 ET/PT.

NBC's move indicates that "viewers want scripted shows at 10 p.m.," says Shari Anne Brill, analyst at big ad firm Carat USA. In prime time, Leno's talk/variety hybrid was "something done at the beginning of television. Networks still need a (big) audience."

NBC Universal TV chief Jeff Gaspin acknowledged Sunday that Leno's prime-time effort didn't measure up and said he made the call to cut bait late last month: "While it was performing at an acceptable level (financially) for the network, it did not meet our affiliates' needs, and we realized we had to make a change."

The main complaint: Stations' late local newscasts, which deliver a big chunk of their profits through TV ads, were hemorrhaging viewers. And O'Brien's late-night ratings were little more than half the total Leno had claimed last season, ending NBC's 15-year run in first place in the late-night time slot.

Gaspin said his goal is to "keep Jay, Conan and Jimmy (Fallon) as part of our late-night lineup." Under the new plan, Late Night With Jimmy Fallon would move from 12:35 a.m. to 1:05. (Carson Daly's talk show, which now follows Fallon, would be canceled, though Daly would remain under contract at the network.)

But "as much as I would like to tell you we have a done deal, we know that's not true," Gaspin said. "The talks are still ongoing."

NBC expects to resolve O'Brien's fate, one way or the other, by the time the Winter Olympics begin Feb. 12. The Olympics are expected to deliver a big audience the network plans to use to promote its rebuilt prime-time and late-night schedules starting March 1.

"What's important to Jay is telling jokes at 11:30, and what was really important to Conan beyond that is having the franchise of The Tonight Show," Gaspin said. "I obviously couldn't satisfy either with 100% of what they wanted; that's why I came up with this compromise."

O'Brien to Fox?

NBC wouldn't discuss terms of O'Brien's contract. If he stays, he'd wind up competing not only with current rival David Letterman on CBS but would face CBS' Craig Ferguson and go head-to-head with ABC's Jimmy Kimmel, who appeals primarily to a similar audience of young men. And O'Brien almost certainly would lose even more viewers by reverting to a later time slot.

Should O'Brien leave the network, Leno would again inherit The Tonight Show, a post he never wanted to leave. O'Brien's most obvious destination would be Fox, which expressed interest in him in 2004 and does not currently program in late night except on Saturdays. (ABC says it does not plan to pursue O'Brien.)

In a statement, Fox said that "we've always been interested in late night, and we're always looking to bring great new talent to Fox."

Many Fox stations, however, earn big profits with syndicated reruns of shows such as Seinfeld and The Simpsons in late night, and they might balk at turning an hour over to the network at 11 p.m. ET/PT. That, coupled with the cost of bringing O'Brien aboard, makes such a move by him anything but a slam dunk.

O'Brien's representatives could not be reached for comment Sunday, but on Friday's show he addressed rumored changes, joking that "NBC is going to throw me and Jay in a pit with sharpened sticks. The one who crawls out alive gets to leave NBC. Trust me, that is an appealing proposition."

Leno, too, joked last week about reports that his prime-time show would be canceled. "I don't think there is any truth to the rumors," he told viewers. "See, it's always been my experience that NBC only cancels you when you're in first place."

While hosting The Tonight Show, O'Brien has shed many of Leno's former late-night viewers. Meanwhile, Leno's prime-time audience (about 5.6 million viewers overall) was 30% lower than the schedule it replaced among NBC's young-adult target audience.

Many of those viewers went to basic cable channels, not to broadcast rivals, according to Nielsen research. During local newscasts, such viewers also often use their DVRs to catch up on recorded shows. It all has contributed to plummeting local newscasts on NBC's affiliates.

Gaspin said about one-third of NBC's 200 or so stations "were really hurt by it and incredibly concerned" by Leno's ratings, warning they'd act if NBC didn't.

"The drumbeat started getting louder and louder, and toward the middle of December they made it very clear they were going to start getting more vocal about their displeasure and were starting to talk about the possibility of pre-emptions," Gaspin said, referring to local affiliates' option to run their own programming rather than that provided by the network. "It was then that I realized this was not going to go well. This was going to be a PR nightmare."

Affiliates sought move

NBC considered several other options, including cutting Leno to fewer nights or keeping the prime-time show until September, but ultimately decided to wipe the slate clean sooner.

"I would have much preferred to concentrate on launching new shows than now trying to explain to people why we have an (entirely) new schedule. I would have much preferred to wait until September," Gaspin said. But "we needed to signal to stations that we were willing to act."

Gaspin denied the move was hastened by cable giant Comcast's agreement last month to acquire a controlling interest in NBC Universal, which faces regulatory hurdles that could be complicated by station unrest.

Many advertisers were dubious about Leno's prime-time prospects in the first place. They questioned why NBC would go through with a plan to unseat the king of late night, a plan put in place by Jeff Zucker, NBC Universal's CEO.

"I was kind of lukewarm to the whole idea," Brill said. "They really hurt themselves by doing this, but they hurt themselves the last two years by cutting back on development" of new series. "There were a lot of forces at work helping to create the situation they're in."

Even Jerry Seinfeld, the Leno Show's first guest, weighed in Sunday, saying it was "the right idea at the wrong time. I'm proud of NBC that they had the guts to try something so original."

Gaspin agreed that other programming failures compounded the debacle. "Had we been stronger (from) 8 to 10 (p.m.), perhaps Jay would have been stronger at 10 and the affiliates wouldn't have had as much an issue," he said in an interview. The network's ability to develop lasting dramas also was limited by turning over five prime-time hours a week to Leno.

Gannett, parent of USA TODAY, owns 11 NBC stations and delivers the most viewers for the network apart from NBC-owned outlets. Dave Lougee, president of Gannett's broadcast group, said bumping Leno back to late night was "a move that needed to take place," since his low ratings "impacted us like everybody. We're very appreciative that Jay is sticking around in his old time slot and very hopeful that Conan will stay with the network as well. They're both great talents."

Michael Fiorile, president of NBC's affiliates board, called Leno's exit from prime time "a great move" for local stations. "We admire their willingness to innovate, and their willingness to change course when it didn't work for us."

It's unclear whether the public profiles of Leno and O'Brien will suffer as a result of NBC's musical chairs. That won't be known until the dust settles and viewers re-embrace the hosts — or don't.

To replace Leno at 10 starting March 1, Gaspin said, NBC is likely to add two more hours of scripted dramas (it can use repeats of Friday Night Lights and Law & Order: Criminal Intent, which now first air on other networks), along with an expanded Dateline NBC. Other current series, such as Law & Order: Special Victims Unit, could shift to later slots.

For fall, NBC ordered seven drama pilots Sunday as potential replacements, including series from high-profile producers David E. Kelley, Jerry Bruckheimer and J.J. Abrams and remakes of Prime Suspect and Rockford Files.

Gaspin said NBC is spending 30% to 35% more on new-program development than in recent seasons and promises viewers will see "high-quality, more traditional NBC programming" next fall with "smart, sophisticated and fun content." After years of audience erosion, "I think we have a shot at actually going up."

Jonathan Littman, who heads Bruckheimer's TV division, welcomed the Leno news.

"Any time you can get more scripted programs on the air, the better," he said, noting that a typical drama employs 200 workers.

"A lot of people really saw this as having a pretty negative impact on our business," said CBS programming chief Nina Tassler, who called Leno's move to prime time "an experiment that obviously did not work."

Ailes Finds Himself In Murdoch Family Firing Line

Guardian UK

Rotund, bald and ferocious, the Fox television boss Roger Ailes is said to have two speeds – attack and destroy. Every night under his watch, millions of Americans are enthused, engrossed or appalled by a lively diet of angry rightwing rhetoric served up on Fox's rolling news channel. But the heady mix of hectoring, finger-pointing and liberal-bashing may be proving too spicy even for the strong stomachs of his employers, the Murdoch clan.

Rupert Murdoch's family, a close-knit, powerful and discreet dynasty scattered across three continents, prefer to air their dirty washing in private. Rumoured squabbles over inheritance, succession and over Murdoch's choice of wife have generally played out behind closed doors.

But a gaping crack appeared in the edifice of unity this week as Murdoch's son-in-law, Matthew Freud, delivered an astonishingly public broadside against Fox News. Freud, a media-savvy London public relations supremo married to Murdoch's daughter, Elisabeth, told the New York Times that members of the Murdoch family had become embarrassed by Fox's output: "I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes's horrendous and sustained disregard of the journalistic standards that News Corp, its founder and every other global media business aspires to."

Freud is said to be adamant that he was speaking on his own behalf, but he is also unrepentant. His words were calibrated to exert maximum damage and are a stunning blow to one of Murdoch's longest serving and most successful lieutenants. Their impact was all the more powerful because such moments of indiscretion are anathema to Murdoch, as one high-ranking former employee recalls. "When you are in the inner circle, you are expected to keep your mouth shut. The mafia call it omerta – the code of silence."

On the face of it, Freud's remark indicates a rift within the family. But some Murdoch-watchers believe it may be a more subtle signal. When Freud spoke, it was not his voice but Murdoch's that many media observers in the US and Britain heard. The author Michael Wolff, who recently penned a biography of Murdoch, believes Freud's outburst may be part of an orchestrated attempt to undermine a lieutenant who is getting a little too powerful. He points out that none-too-discreet "whispering campaigns" pre-empted the departure of other top executives.

"In many instances, it takes about a year to fire someone at a high level within News Corp. They kind of marginalise you, stop speaking to you and eventually you get the message that it's over."

A former political strategist who worked on the successful campaigns of three Republican presidents, Ailes was hired by Murdoch in 1996 to launch Fox News, in a widely scorned effort to challenge the broadcast establishment.

Some 14 years later, Fox is by far America's favourite specialist news channel, pulling in 2.1 million prime-time viewers every evening – more than its two main rivals, CNN and MSNBC, combined. In business terms, it is a jewel in the crown of Murdoch's global media empire, tipped to make $700m (£430m) in operating profit in a difficult year for News Corp. Hit by asset writedowns, the parent company made a loss of $3.3bn last year.

"Fox is a star performer, without a doubt," says Edward Atorino, a media analyst at Wall Street stockbroking firm Benchmark, and Ailes is a key piece in the News Corp jigsaw. "There aren't too many Roger Aileses around … If he were to leave, it would leave a huge hole."

With a pay package of $23m in 2009, Ailes made more money than Murdoch himself. Unusually, he has revealed that he personally lobbied Murdoch after hearing that his US papers might endorse Barack Obama. That irritated younger members of the Murdoch dynasty, while Fox's coverage of Obama since has left some of them horrified. Andrew Neil, who edited Murdoch's Sunday Times for over a decade and is also a former News Corp executive, says James Murdoch and Freud's wife Elisabeth both supported Obama, while Elisabeth raised funds for the Democrats. Neither are liberal, he concedes: "They just happen to be marginally more liberal than Rupert. It's a difference of tone."

Neil doesn't buy the theory that Freud was acting with Murdoch's consent, but agrees that "he is reflecting the views of the younger Murdochs". "What better way to let their liberal friends know they are upset about the way Fox News is behaving than on the front page of the New York Times, the liberal journal of record?"

Although promoted under the slogan "fair and balanced", Fox News horrifies political moderates with the hectoring rhetoric of its prime-time evening anchors. One man in particular, Glenn Beck, raises liberal hackles with his furious diatribes against Obama. Advertisers including Procter & Gamble and the insurer Geico withdrew commercials from Beck's nightly show in August when the anchorman accused Obama of being "racist" towards white people. Just this week, Beck used a blackboard and chalk to illustrate the supposed similarities of Obama's policies to those of the Venezuelan president, Hugo Chávez.

Beck is by no means unique. Conservative commentator Bill O'Reilly has used his primetime Fox show to label Mexicans immigrant "wetbacks". A passionate opponent of abortion, he was criticised last year after a Kansas abortion doctor, George Tiller, was murdered. Repeatedly dubbing him "Tiller the baby killer", O'Reilly had eviscerated him for operating a "death mill" and "executing babies" for profit.

Fox's weekend line-up also includes a chatshow hosted by the former Republican presidential candidate Mike Huckabee, while Sarah Palin was signed up this week as a political commentator.

Fox's style was inspired by America's legion of rightwing radio "shock jocks", according to Kerwin Swint, author of Dark Genius, a biography of Ailes. "It's very anti-government, very anti-establishment," he says. "Part of Ailes's philosophy for television is that it should be confrontational. That draws viewers, it's exciting for people and it's always been a staple of talk radio."

Irritated by Fox's partisan coverage, the White House has upped the ante. Obama has described the Fox network as "entirely devoted to attacking my administration" and has repeatedly snubbed its shows. The White House has been accused of failing to call on Fox journalists at press conferences and freezing the channel's reporters out on overseas trips. Obama's officials are unapologetic – Anita Dunn, former White House communications director, described Fox as "the communications arm of the Republican party".

Fox argues that during daylight hours its coverage is objective, drawing a distinction between daytime reporting and opinion-driven evening shows in the same way that newspapers distinguish between news pages and editorials. And Fox has a track record of breaking major stories – including news damaging to Republicans. But clashing with the White House may not help Murdoch's other business interests, and he has faced pressure to tone Fox down.

"He has members of his family riding him hard about this all the time," says Wolff, adding that Murdoch has become increasingly embroiled with the liberal "chattering classes" of Manhattan and Hollywood under the influence of his wife, Wendi Deng. "He spends a lot of time socialising with people who tell him rather constantly that Fox News is contemptible."

News Corporation was quick to dismiss the row this week, portraying Freud as an outsider. A spokeswoman said: "Matthew Freud's opinions are his own and in no way reflect the views of Rupert Murdoch, who is proud of Roger Ailes and Fox News."

Ailes himself sought to defuse any notion of a rift, telling the Los Angeles Times that "the entire Murdoch family" had always been supportive of him: "There is nothing to the idea that I have any problem with the children."

Jack Shafer of the website Slate suspects Ailes is getting too uppity for his boss's liking: "There's only one star in the News Corporation firmament and it's Rupert Murdoch. You succeed there by keeping your head down and working hard. Murdoch despises glory-grabbers." Neil, who was sacked by Murdoch, concurs. "He hates it when the hired hands get above themselves, so Ailes's days are numbered."

Murdoch will be flying to the Swiss ski resort of Davos in two weeks to rub shoulders with the world's business and political elite. Unusually, Freud won't be attending. Murdoch watchers may seize on that as evidence that Freud has been frozen out by Murdoch, at least for now. Ultimately, however, it may be the rumbustious Ailes who is left out in the cold.

A Fox Chief At The Pinnacle Of Media And Politics

NY Times

In the fall of 2008, Roger Ailes, the head of Fox News, went to his boss, Rupert Murdoch, with two complaints: he had heard that Mr. Murdoch was considering endorsing Barack Obama for president in The New York Post, and he had read a book excerpt in Vanity Fair suggesting that Mr. Murdoch was sometimes embarrassed by the right-leaning Fox News.

Mr. Ailes threatened to quit, a person familiar with the conversation said. Instead, Mr. Murdoch soon rewarded him with a new, more lucrative contract — he made $23 million last year in salary, bonuses and other compensation, more than Mr. Murdoch — and The New York Post endorsed John McCain.

In an interview in late December in his office at News Corporation headquarters in Midtown Manhattan, Mr. Ailes conceded that he had opposed an Obama endorsement. (“I didn’t think he had the experience,” he said, adding, “I don’t tell Rupert Murdoch who to endorse.”) He was outraged by the Vanity Fair article but said he “demanded nothing” and did not threaten to quit. He said he did not have to.

“If you’re making money and you’ve hit your targets for five years, you don’t need to demand a new contract,” he said.

Mr. Ailes is certainly making money. At a time when the broadcast networks are struggling with diminishing audiences and profits in news, he has built Fox News into the profit engine of the News Corporation. Fox News is believed to make more money than CNN, MSNBC and the evening newscasts of NBC, ABC and CBS combined. The division is on track to achieve $700 million in operating profit this year, according to analyst estimates that Mr. Ailes does not dispute.

This outsize success has placed Mr. Ailes, an aggressive former Republican political strategist, at the pinnacle of power in three corridors of American life: business, media and politics. In addition to being the best-paid person in the News Corporation last year, he is the most successful news executive of the last 10 years, and his network exerts a strong influence on the fractured conservative movement.

Mr. Obama told The New York Times Magazine in October 2008 that the “Fox effect” had cost him two to three points in the polls. Since that election, Mr. Ailes and his cohort of conservative anchors like Glenn Beck, Bill O’Reilly and Sean Hannity have been riding a wave of discontent that sometimes puts them at odds with the Republican Party’s establishment, most recently with Fox News’s advocacy of an independent candidate in the 23rd Congressional District in upstate New York. The Republican candidate eventually withdrew.

“When you think about that, it’s the equivalent of the endorsement major newspapers used to provide,” said David Gergen, an analyst on CNN who has been an aide in Democratic and Republican administrations.

He went on: “Regardless of whether you like what he is doing, Roger Ailes is one of the most creative talents of his generation. He has built a media empire that is capable of driving the conversation, and, at times, the political process.”

Mr. Murdoch, in a statement relayed by a spokesman, said: “I’m proud of Fox News and what it is accomplishing, and I am grateful to Roger and his team for creating such a great asset for News Corporation.”

Mr. Ailes’s approach has put him at odds not just with the Democrats but also with the more liberal members of his boss’s family.

He played a well-chronicled role in the decision in 2004 by Lachlan Murdoch, Mr. Murdoch’s eldest son, to leave the company; he thought Mr. Ailes was intruding on his corporate turf. Two other Murdoch children, Elisabeth, a television producer in London, and James, the only Murdoch scion employed at the company, are sympathetic to Democratic causes and frequently voiced concerns to their father during last year’s presidential campaign about Fox News’s coverage of Mr. Obama.

And those concerns have only grown.

“I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes’s horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to,” said Matthew Freud, who is married to Ms. Murdoch and whom PR Week magazine says is the most influential public relations executive in London.

In the interview, Mr. Ailes said that both Mr. Murdoch and the News Corporation had been consistently supportive of Fox News and its approach.

Mr. Ailes, the son of a foreman at the Packard Electric plant in Warren, Ohio, described his upbringing with three words: “God, country, family” and said that credo was responsible for the success of Fox News.

“I built this channel from my life experience,” Mr. Ailes, 69, said. “My first qualification is I didn’t go to Columbia Journalism School. There are no parties in this town that I want to go to.”

Mr. Ailes majored in radio and television at Ohio University and worked for “The Mike Douglas Show,” where at age 27 he met then-presidential candidate Richard M. Nixon in 1968.

“The camera doesn’t like you,” he told Mr. Nixon, according to “Crazy Like a Fox,” a book by Scott Collins about Fox News.

“It’s a shame a man has to use gimmicks like this to get elected,” Mr. Nixon said.

“Television is not a gimmick, and if you think it is, you’ll lose again,” Mr. Ailes said. The Nixon campaign hired him a few days later.

The night in 1969 when Neil Armstrong walked on the moon, Mr. Ailes was inside the Oval Office setting up a screen on the president’s desk. The next year, Mr. Ailes was sent to Hawaii in advance of the attempt by the troubled Apollo 13 mission to return to earth. He prepared for two events in adjacent hangars: a funeral and a welcome home ceremony. Apollo 13 made it home safely.

 Joe McGinniss, who wrote about Mr. Ailes in his 1969 book, “The Selling of the President 1968,” keeps in touch with him. “Success never made that chip on his shoulder go away,” Mr. McGinniss said. “He holds onto what he envisions to be the values of the heartland and is suspicious of people on either coast.”

After serving as a communications consultant for politicians and executives, Mr. Ailes ran CNBC, the business network, in the early 1990s under Bob Wright, then the chief of NBC.

 “He’s got a very good sense of simplicity on air,” Mr. Wright said. “Because he had that background of being involved in political campaigns, he could develop a message and deliver it, and test it quickly to see if it’s effective.”

Mr. Ailes started Fox News in 1996 and faced skepticism that it ever could be a rival to CNN, much less the ratings and profits leader it is today. As recently as 2002, the network made very little money, said Michael Nathanson, an analyst at Sanford C. Bernstein & Company. Today, its vast profits secured by ever-rising fees from cable companies make it “probably the single most important asset at News Corporation,” he said.

“I built this business to throw off a billion dollars in profit,” Mr. Ailes said. “That was the goal from Day 1. In my own mind.”

Rick Perlstein, author of “Nixonland,” sees a strong resemblance between Mr. Ailes’s political experience and his approach to television.

“Like Richard Nixon, like Spiro Agnew, Fox News can never see itself as the attacker,” he said. “They are always playing defense because they believe they are always under attack, which attracts people that have the same personality formation. By bringing that mind-set, plus the high energy seamless stream of the aggression of talk radio, he has found an audience.”

Not all of Mr. Ailes’s political interests are national in scope. In 2002, after buying a weekend home in Putnam County, N.Y., an area rich in American history (a passion of Mr. Ailes’s) about 60 miles north of Manhattan, he became keenly interested in local issues. In 2008, he bought two local newspapers and installed his wife, Elizabeth, as publisher of both. He also has a young son.

There, he has engaged in a more direct version of politics. He is extremely concerned about zoning, among other local issues.

At a town hall forum on Oct. 26 sponsored by one of his newspapers, he had a heated exchange with Richard Shea, a Democratic councilman who was running for town supervisor. “I turn around, and there he is,” said Mr. Shea, who won the election. “He starts right in on the zoning. He says, ‘What are you trying to hide from me in the zoning?’ He said, ‘I own the newspaper.’ ”

Mr. Shea continued, “My takeaway was that this guy is pretty much threatening me.”

Mr. Ailes said he simply asked for Mr. Shea’s phone number and complained about “environmental zealots” in the town. “I am a conservationist,” he said. “I try to put the bottle in the right can.”

As powerful as he is within the News Corporation, Mr. Ailes remains a spectral presence outside the Fox News offices. National security had long been a preoccupation of Fox News, and it was clear in the interview that the 9/11 attacks had a profound effect on Mr. Ailes. They convinced him that he and his network could be terrorist targets.

On the day of the attacks, Mr. Ailes asked his chief engineer the minimum number of workers needed to keep the channel on the air. The answer: 42. “I am one of them,” he said. “I’ve got a bad leg, I’m a little overweight, so I can’t run fast, but I will fight.

“We had 3,000 dead people a couple miles from here. I knew that any communications company could be a target.”

His movements now are shadowed by a phalanx of corporate-provided security. He travels to and from work in a miniature convoy of two sport utility vehicles. A camera on his desk displays the comings and goings outside his office, where he usually keeps the blinds drawn.

Mr. Ailes said he received frequent threats over the years, but his concerns for the safety of his family were heightened by an incident at his New Jersey home after the 9/11 attacks. There was an intruder on his property, but no arrest was made. In Putnam County, he has bought several properties surrounding his home. A sign outside his house shows an illustration of a gun and advises visitors that it is under video surveillance.

After 9/11, Mr. Ailes sent a memo to President George W. Bush urging harsh action. Despite the influence Fox News has over many Republicans — the megaphone of Fox News is a valuable one for Republican politicians — he is generally not eager to be seen as having any relationship with the party. His influence in politics is once-removed, expressed through the talent he chooses and the tone he sets.

In a sense, trading intelligence with party officials would be a step down for Mr. Ailes. “He understands the news media, politics and the American people as well as anyone in the modern age,” said Newt Gingrich, the former speaker of the House.

Even Mr. Ailes’s political foes understand the influence of what he has built at Fox News.

“If he were a Democrat, I think there would be 67 Democratic senators right now,” said the political consultant James Carville, a former Clinton aide and a frequent guest on CNN. “In terms of the news business, the cable television business, and the political business, there is him and then there is everybody else.”

Fox, Other Networks Interested as Conan Studies Options‏

Bloomberg

Conan O'Brien On The Way Out at NBC
Jay Leno Getting Moved Back To Late Night

News Corp.’s Fox is among several TV networks interested in hiring “Tonight Show” host Conan O’Brien if the comedian decides to leave NBC, according to people with knowledge of the situation.

O’Brien, 46, who took over as host of “The Tonight Show” in June, planned to begin considering options after taping last night’s show, said one of the people, who declined to be identified because the deliberations are private.

The comedian, who prefers to stay at NBC, isn’t concerned that by changing networks he may have to compete with Jay Leno, one of the people said. NBC is considering moving “The Jay Leno Show” from its current 10 p.m. slot to 11:35 p.m. to bolster prime-time and late-night ratings, according to network officials with knowledge of the situation. The change would push “The Tonight Show” back one-half hour.

“To move or replace talent you have to give them something, money or something else,” Laura Martin, an analyst at Needham & Co. in Pasadena, California, said in an interview.

Rebecca Marks, an NBC spokeswoman, declined to comment. She pointed to a Jan. 7 statement that the network is committed to keeping O’Brien on the air.

Fox, controlled by News Corp. Chairman and Chief Executive Officer Rupert Murdoch, said it’s interested in adding late- night programs and views O’Brien as a natural candidate.

O’Brien’s contract with General Electric Co.’s NBC remains an obstacle, according to Los Angeles-based Fox. The Wall Street Journal reported earlier that O’Brien was considering a move.

Wait and See

Fox is waiting to see how events unfold at NBC. Comcast Corp., the largest U.S. cable company, plans to acquire control of NBC Universal through a joint venture with GE.

ABC is happy with its current late-night schedule and doesn’t plan to approach O’Brien, according to a spokesman for the network, owned by Burbank, California-based Walt Disney Co.

NBC aims to settle the programming questions by Jan. 21, when executives hold a regular meeting with representatives of affiliate stations, one of the people said. Leno has agreed to host a half-hour show starting at 11:35 p.m., the people said.

GE, based in Fairfield, Connecticut, gained 35 cents to $16.60 yesterday in New York Stock Exchange composite trading. Comcast, based in Philadelphia, dropped 5 cents to $16.92 on the Nasdaq Stock Market, while News Corp. Class A added 12 cents to $14.12.

Leno, 59, moved to prime time to make way at “The Tonight Show” for O’Brien. NBC announced O’Brien would take over five years earlier.

Cable TV Standoffs Could Raise Costs And Limit Viewer Choices

NY Times 

Many questions remain for cable TV viewers nationwide even after Fox and Time Warner Cable settled their noisy spat with a New Year's Day agreement.

The deal was good news for more than 6 million Time Warner customers in the short term: College bowl and National Football League games, ''American Idol'' and a host of other popular Fox programs in New York, Los Angeles, Dallas, Orlando, Fla., and other markets are appearing on their screens as usual.

Sharri Genens of Redondo Beach, Calif., was among the Time Warner customers who were relieved. She said she was extremely upset when she heard she might lose Fox.

''I would have dropped cable entirely if they'd done that,'' said Genens, 39. ''I would have just gone to somebody else to pay more, done whatever I needed to do to get my shows'' -- including football.

Fox had threatened to force Time Warner Cable and Bright House to drop its signal from 14 of its TV stations and a half-dozen of its cable channels if Time Warner didn't increase payments to Fox in a contract that took effect Friday. The deal affects close to half its customers. Time Warner is the nation's second-largest cable provider after Comcast Corp.

But the companies are not talking about how the agreement will affect customers' bills. And the mood among cable providers, broadcasters and other content producers has not improved.

A less amicable ending in a separate programming dispute showed the downside of playing hardball.

Cablevision Systems Corp. customers in New York, New Jersey and Connecticut reacted angrily in more than 100 posts Friday and Saturday on the media and entertainment news site Deadline.com after about 3.1 million subscribers lost access Friday to HGTV and Food Network Friday.

Comments accused Cablevision and Scripps Networks Interactive Inc. -- but mostly Cablevision -- of greed and arrogance when they failed to reach agreement over a fee increase Scripps demanded.

Many of those who posted said they were switching to competitors or satellite or going online. Some were particularly upset at the prospect of missing a two-hour Iron Chef episode set for 8 p.m. EST Sunday that features Michelle Obama and the White House chef.

Neither Cablevision nor Scripps responded immediately Saturday to questions about the status of talks. And representatives of Time Warner and Fox remained mum about the terms of their new deal, declining requests to comment.

Fox had demanded to $1 per cable subscriber per month for programming it used to gave away, saying it no longer can afford to offer programming free when cable channels earn subscriber fees.

Until the 1990s, advertising and fees from local affiliates supported all four of the nation's main broadcast networks -- ABC, NBC, CBS and Fox.

But advertising income has plunged, and by 2008 cable-only producers took in almost 39 percent of TV ad revenue, which broadcasters used to have to themselves. So the networks are increasingly dependent on the license fees they began charging cable providers in 1994.

Fox didn't get all it wanted, but Chase Carey, chief operating officer at News Corp., said Friday the agreement ''recognizes the value of our programming.''

Time Warner continued to carry Food Network and Great American Country as its talks with Scripps went on.

And cable company Mediacom Communications Corp. will keep carrying Fox and CBS signals from Sinclair Broadcasting Group Inc. stations in markets such as Des Moines and Cedar Rapids, Iowa, in a temporary deal that extends to next Friday.

Telephone messages left for Sinclair and Mediacom on Saturday were not immediately returned.

The standoffs refocused attention on the law that let broadcasters start charging fees cable and satellite operators for their programs.

Advocacy groups and some politicians oppose the 1994 law because it lets both cable operators and content producers pass along to consumers the cost of programs they could watch for free when broadcast dominated the television market.

''I think there needs to be some sort of government oversight over the cable industry,'' Mindy Spatt, spokeswoman for The Utility Reform Network, a San Francisco consumer advocacy group, said Saturday. ''There's a danger for consumers that the price is just going to keep rising with no end in sight.''

Sen. John Kerry, D-Mass., said in a statement that broadcasters and cable operators should be able to reach terms without ''consumers being put in the cross hairs.''

The prospect of lawmakers stepping in to take action ultimately may have persuaded Fox to settle, according to Time Warner Cable.

''Engagement by key policy makers ... focused on protecting consumers, was instrumental in preventing unnecessary consumer disruption,'' said company spokeswoman Maureen Huff.

Fox And Time Warner Cable Reach Agreement

LA Times

The first big media showdown of 2010, which threatened to break out in war, ended with a peace treaty.

After weeks of posturing and mudslinging media campaigns, an agreement was reached Friday afternoon that will keep News Corp.'s Fox television stations and several of its cable channels on Time Warner Cable systems in Los Angeles and nationwide.

The deal was struck less than a day after the previous contract expired, averting a potential public relations disaster for both companies. Otherwise, Time Warner Cable customers would have had to find alternative ways to watch the college bowl and National Football League games broadcast on Fox during one of the biggest sports weeks of the year.

News Corp. granted extensions to Time Warner Cable to keep the Fox signals on the air while talks continued, and viewers were spared having to wonder what happened to their programs.

Such standoffs between programmers and distributors, once rare, are becoming more commonplace. With advertising dollars tougher to come by and audiences fragmenting, broadcasters are seeing fees from cable and satellite operators to retransmit their signals as a crucial component of their financial health.

Washington lawmakers pressured News Corp. and Time Warner Cable not to drag consumers into their financial dispute by allowing the Fox signals to go dark just before the network started airing a series of popular bowl games.

Sen. John F. Kerry (D-Mass.), chairman of the Senate Commerce Subcommittee on Communication, Technology and the Internet, and Julius Genachowski, chairman of the Federal Communications Commission, praised the two companies for reaching the accord.

In addition to the Fox TV stations -- including KTTV-TV Channel 11 and KCOP-TV Channel 13 in Los Angeles -- several cable networks, including FX, Fuel and local sports channels Prime Ticket and Fox Sports West, are covered by the new contract. Fox News has a separate deal with Time Warner Cable and was not part of the dispute.

News Corp. had been seeking a fee of $1 per subscriber, per month, to carry its Fox TV stations. Time Warner countered with an offer in the neighborhood of 30 cents. In pressing for the $1 fee, News Corp. argued that cable channel TNT gets about that amount with a smaller audience.

Time Warner Cable contended that Fox was trying to extract too high a price and bought advertisements in newspapers accusing it of trying to hold consumers "hostage."

Neither Time Warner nor News Corp. would provide details on the new agreement. In a statement, News Corp. President Chase Carey said the pact was "fair" and "recognizes the value of our programming." Time Warner Cable Chairman Glenn Britt called it a "reasonable deal."

Although News Corp.'s Carey had talked tough about sticking to Fox's demands, analysts viewed the $1 fee as a jumping-off point for negotiations. Typically, carriage deals last at least three years, and often five, with the fees paid by the cable operator rising over the period of the deal.

Though the Time Warner and Fox corporate slugfest ended without any signals being lost, fans of Food Network and Home & Garden Television were not so lucky.

Those cable channels, operated by Scripps Networks Interactive Inc., went off the cable systems of Cablevision Systems Corp., which serves parts of Long Island, New York City and Connecticut, because of a similar dispute.

Bobby Flay, a chef who has a show on Food Network, told his Twitter followers to "bang away at Cablevision."

Another retransmission fight is occurring between Maryland-based Sinclair Broadcast Group, one of the nation's largest owners of TV stations, and Mediacomm Communications Corp., a cable operator with systems in 23 states.

Time Warner Cable, which is also negotiating with Food Network, may face another such scenario this year when it has to sign a new agreement to continue carrying Walt Disney Co.'s ABC stations, including KABC-TV Channel 7 in Los Angeles. Those two companies are no strangers to bitter fights. In 2000, the signals for ABC's stations went off of Time Warner for almost two days during a public battle.

Despite the public acrimony between News Corp. and Time Warner, the private negotiations were for the most part amicable, people close to the situation said.

The negotiations were held on the Fox lot in Century City. Mike Hopkins, who oversees distribution for Fox, and Melinda Witmer, Time Warner Cable's programming chief, would huddle with their respective teams in a conference room in a studio office building. Then each side would retreat to a war room and debrief their bosses and analyze the proposals.

That didn't mean there weren't some testy moments.

Early Friday morning Time Warner Cable ran an announcement on some of its East Coast systems that said it had "reached an agreement with Fox that protects our customers' pocketbooks." In fact, no deal had been reached, and the triumphant tone of the announcement irritated Fox executives.

Representatives of Time Warner Cable acknowledged the foul-up but declined to explain how it happened.

Plot Thickens In Fox, Time Warner Cable Feud

New York Post

What began as an impasse yesterday became a full-fledged war between Time Warner Cable and News Corp.'s Fox, as both sides sought to position the other as responsible for the increasingly likely blackout of the broadcast network at midnight.

With just hours remaining before Fox could go dark on Time Warner cable systems, both camps dispensed with the pleasantries that came to define the negotiations of what many see as a precedent-setting retransmission agreement.

Time Warner Cable CEO Glenn Britt fired the first shot yesterday in a letter to Sen. John Kerry (D-Mass.), offering to keep Fox on the air if the network agreed to submit to binding arbitration or another interim agreement. Britt was responding to a letter Kerry sent both companies last week in which the lawmaker suggested arbitration as a way to bridge the gap between the $1 per subscriber that Fox is asking for and what Time Warner is willing to pay for the network. (In addition to Fox, News Corp. also owns The Post.)

"We are willing to commence an arbitration proceeding immediately before the [Federal Communications Commission]," Britt wrote, adding that, "consumers should not be caught in the middle as broadcasters and video distributors work through these contentious issues."

Sources said Britt's letter was a shrewd negotiating tactic, as it put Fox in the position of having to choose between two unsavory options: Agree to binding arbitration, in which case Fox certainly wouldn't get the $1 per subscriber it's asking for, or blacking out the network, which not only would cost it money in the form of make-goods to advertisers, but may also put the network on the receiving end of viewer anger.

News Corp. Chief Operating Officer Chase Carey, in his own letter to Kerry, moved to neutralize such a public perception from forming while also dismissing the notion that arbitration was an acceptable alternative to a privately negotiated deal.

"When Congress enacted the 1992 Cable Act, it established a clear mechanism for programmers and distributors to reach market-based agreements on the basis of direct negotiations," Carey wrote. "We respectfully believe these discussions do not belong in the hands of a third party."

In a memo yesterday to Fox employees, Carey made clear that the company is prepared to wage this fight in order to get "fairly compensated" for its programming. "At this time, it looks like we will not reach an agreement and our channels may very well go off the air in Time Warner Cable systems," Carey wrote.

In both his letter to Kerry and to employees, Carey noted that Fox's $1 per subscriber request is equal to what Time Warner Cable pays for cable network TNT, which has lower ratings. If the network goes dark, Time Warner's 13 million subscribers will miss out on New Year's Day college football and NFL games.

Fox, Time Warner Face Off Over Fees

USA Today

Millions of TV viewers eager to watch American Idol and 24 or football games featuring the New York Giants could be in for a shock beginning New Year's Day.

They might be unavailable on Time Warner Cable systems in cities including New York and Los Angeles if the No. 2 cable operator can't reach an agreement to carry stations owned by the Fox broadcast network.

The current contract expires Thursday. It also covers some of parent company News Corp.'s regional sports networks, FX, Speed and Fox Reality Channel. The companies are locked in a bitter and potentially precedent-setting dispute over renewal terms from Fox that Time Warner Cable warns also could result in higher monthly rates for consumers.

"What consumers are saying is, 'Why can't I buy less?' " says Melinda Witmer, chief programming officer at Time Warner Cable.

There's "a high likelihood that programming will get dropped (or) pulled," says Pali Research analyst Richard Greenfield.

If that happens, Fox would lose revenue from advertisers, because ads would reach fewer viewers. And Time Warner Cable might see some customers switch to another service.

To avoid all that, Sen. John Kerry, D-Mass., urged the companies last week to get an arbitrator to help.

At issue is Fox's effort to get cable operators to pay its local stations a monthly fee, widely believed to be about $1 a month for each cable subscriber. Fox declined to comment.

With minor exceptions, operators don't pay cash to carry local stations. Instead, they've compensated broadcasters by paying for cable channels they've created: For example, Disney, which owns ABC, launched ESPN2. Fox created FX.

Now Fox says it wants payments for its local stations. "We need to have a business model that enables us to compete" with basic cable, News Corp. COO Chase Carey said this month. Time Warner Cable, with 13 million subscribers, says that it has to draw the line on price increases.

(No. 1 cable operator Comcast is not in a good position to lead this fight. It has a deal to buy a controlling stake in NBC Universal. That company sides with Fox on this issue.)

Time Warner Cable also is challenging the value of network TV. It says that Fox and others have hurt themselves by offering shows for free at websites such as Hulu.

The company's threatening to escalate the fight by giving consumers more flexibility to buy the networks they want. That could doom expensive or low-rated channels.

"What consumers are saying is, 'Why can't I buy less?' " says Melinda Witmer, chief programming officer at Time Warner Cable.