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.

Revenue Down For Time-Warner

NY Times

Time Warner, the media conglomerate that was once the world’s largest but has lately slimmed down by shedding some businesses, said both revenue and profits declined in the recent quarter.

The results were hurt by one business that the company has said it will spin-off — AOL — and another that has been battered by the advertising recession and is not viewed by executives as central to the company’s future, the Time Inc. magazine publishing empire.

The company’s biggest business, cable networks, which includes channels such as HBO, TNT, TBS and CNN, gained in revenue and profit. Revenue at the movie unit, the Warner Brothers studio, declined mainly because of lower DVD sales, a trend that has been felt across Hollywood, although its profitability improved.

Time Warner’s performance, like the results posted Monday by a rival, Viacom, is emblematic of a mainstream media industry that is largely contracting as consumers change how they view television and movies. The trend is compounded by the recession.

So media executives are left to cut costs to maintain profitability, rather than increase the revenue pie.

“We are executing well, despite the tough environment,” said Jeffrey L. Bewkes, Time Warner’s chief executive officer, in a conference call with Wall Street analysts.

Over all in the third quarter, revenue declined 6 percent, to $7.1 billion. Net income was $661 million, down from $1.1 billion in the last year’s third quarter. Operating income decreased 10 percent, to $1.4 billion.

The results, though, were better than Wall Street forecast, and the company raised its financial outlook for the remainder of the year. Excluding certain items, the company reported earnings-per-share of 61 cents, better than the 55 cents expected by Wall Street, according to Thomson Reuters.

AOL posted a 23 percent drop in revenue, to $777 million. But the company plans to complete its spin-off of the unit by the end of the year. At Warner Brothers, revenue fell 4 percent, while operating income increased 6 percent to $291 million.

Warner Brothers, like other studios, is facing a decline in DVD sales, which once drove growth in Hollywood. But the performance of the unit, particularly the increase in profits, surpassed what many on Wall Street expected. The studio’s major release in the quarter was “Harry Potter and the Half-Blood Prince.” “I think the most noteworthy thing in the quarter is film,” said Anthony DiClemente, an analyst at Barclays Capital. “They’ve grown operating profits at film for each of the past six quarters. “A lot of it is streamlining and cost cutting,” he said.

The only division of Time Warner to post revenue growth was its cable networks. Revenue there rose to $2.87 billion, from $2.73 billion in the quarter a year ago. Operating income rose to $938 million from $909 million.

Time Warner confirmed that it would take a $100 million restructuring charge to lay off hundreds of workers at Time Inc., which publishes titles like Time, Sports Illustrated, People and Fortune. Also Tuesday, the company said it would close Fortune Small Business, which is produced by Time Inc. but owned by American Express. In the quarter, Time Inc.’s revenue declined 18 percent to $914 million, while its operating income declined 40 percent, to $97 million, from last year’s third quarter.

Advertising revenue declined by $129 million, or 22 percent, while subscriptions declined 13 percent, to $49 million.

Mr. Bewkes said he believed much of the downturn in magazine advertising a result of the recession rather than permanent shifts of readers turning away from print and toward the Internet. This view runs counter to that of many others who believe that print is on a steady decline and will never return to the growth it once enjoyed.

MySpace Strives To Recapture Its Focus On Music, Entertainment

From the Wall Street Journal

A new executive team at MySpace is trying to reignite the brand by focusing on areas like music, videos and games as users abandon the social-networking site for cooler destinations.

MySpace, which is holding a conference this week for its global ad-sales staff, needs to lure visitors back and kick-start advertising revenue, ad executives say. Research firm eMarketer estimates U.S. ad spending on the site will be $495 million this year, down 15% from $585 million in 2008.

The basic challenge is similar to the one facing big Internet companies, such as Time Warner's AOL and Yahoo, that are under pressure to reinvent themselves for fickle audiences.

"I've been in the Internet business for 15 years. There's always the new, new thing," says Jason Hirschhorn, the company's chief product officer. "Everybody plateaus at some point. The ones that remain remain relevant with their user base."

In a strategy shift, MySpace is striving to become an online hangout for people to connect with friends over entertainment content, whether it's the new Pearl Jam album, blogs from celebrities like British pop singer Lily Allen or a karaoke contest for the Fox musical comedy "Glee."

MySpace says ramping up its technology initiatives to create new products that let users share such content with friends is an essential part of its strategy.

MySpace's online-hangout push marks an effort to focus its offerings and differentiate itself from rival Facebook. As an entertainment site, MySpace would compete for ad dollars with a broader group of Web sites, including online video sites like Google's YouTube and Hulu, a joint venture of General Electric's NBC Universal, News Corp. and Walt Disney. It also would compete against music sites like Pandora and portals like AOL, which is also trying to reinvent itself with a push to create content.

"This is not an all-things-for-everybody portal," Mr. Hirschhorn says. "This is a social entertainment experience."

Fox and MySpace are owned by News Corp., which also owns Dow Jones & Co., publisher of The Wall Street Journal.

To take its new pitch to Madison Avenue, MySpace has hired former MTV executive Nada Stirratt as chief revenue officer, responsible for overseeing global ad sales. Ms. Stirratt, 44 years old, most recently worked as executive vice president of digital ad sales at Viacom's MTV Networks.

MySpace CEO Owen Van Natta, who was hired nearly six months ago to revive the site and has since turned over almost the entire executive suite, introduced Ms. Stirratt to staff this week at the sales conference, during which executives outlined the company's strategy.

Although MySpace drew an audience of 64.2 million unique U.S. visitors in August, that figure is down 15% from the same period a year earlier, according to comScore. Facebook drew 92.2 million unique U.S. visitors in August, more than double the number a year earlier.

Like her rivals, Ms. Stirratt will have to address broader, looming questions about the viability of social-networking sites as a place for advertising.

Marketing via social-networking sites isn't simply about buying ads on a page. It requires that marketers interact with users on the sites, says Greg Smith, chief operating officer at Neo@Ogilvy, a digital ad agency owned by WPP. "It requires a whole new way of thinking," he says.

MySpace declined to make Ms. Stirratt available to comment.

Ms. Stirratt, who earlier in her career directed sales at Internet-ad company Advertising.com, has a reputation on Madison Avenue as a savvy businesswoman who understands the technical side of the Internet business but also knows how to build creative ad sponsorships that attract dollars from big brand advertisers.

So far, most of the developments under the new MySpace management team have focused on cleaning up the underlying technology of the site and making it easier for visitors to use. Users previously couldn't upload a photo to blog posts, for instance.

MySpace also is reconfiguring search technologies for the site and has removed features that didn't fit into its new strategy, including weather, jobs and classifieds. In the past few months, it has released features including a fresh homepage for its music site and a feature that connects to Twitter, the microblog site.

Further developments are likely to center on building technologies that let users more easily share entertainment.

Ad executives say that MySpace Music has registered some success, drawing 24.8 million unique U.S. visitors in September, up 24% from a year earlier, but they say they have yet to see major changes across the board for MySpace.

MySpace lost its way over the years as it got caught up in a race with Facebook, launched disparate initiatives and let technology and new-product developments lag, ad executives say.

Those missteps cost MySpace much of its buzz on Madison Avenue and its organic search marketing, says Shiv Singh, vice president and global social-media head at Razorfish, the digital-ad agency owned by Publicis Groupe.

"Marketers want to align their brands with the newest and the greatest. Currently, that is Facebook and Twitter," Mr. Singh says.

"Hardly a day goes by without a client asking me, 'What should I do with Facebook?' I don't get anywhere near as many questions about MySpace," he adds.

"They are not hiding from the challenges," says Doug Neil, senior vice president of digital marketing at GE's Universal Pictures, which recently bought promotions on MySpace for its films "Cirque du Freak: The Vampire's Assistant" and "Couples Retreat." He adds: "But can they re-steer the ship?"