Fox Broadcasting is brashly urging affiliates not to sell themselves short when it comes time to negotiate with cable operators as a result of the retransmission consent provision in the new cable reregulation law.
Fox senior veepee of affiliate relations Preston Padden this week sent a memo to the weblet’s general managers to “dispel the myth” that Fox does not deserve to be compensated by cablers for its product. The memo was headlined: “WE ARE VALUABLE.”
The Padden memo represents the first example of a broadcast company’s effort to squeeze retransmission consent coin out of cable operators.
Under the new law, broadcasters and cable operators are forced to negotiate cable’s carriage rights of local stations. Broadcasters can either select retransmission consent–which could result in cablers paying an unspecified amount of money for the right to carry the broadcast station–or the broadcaster could select “must-carry” protection ensuring that cablers continue carrying the station.
Padden’s memo makes clear Fox believes its affils deserve cash.
The missive declares, “Cable’s free use of our product will be soon be over and we must fairly assess our place and remuneration against the field–including ABC, CBS and NBC.”
The memo says that cable operators now shell out $ 1.8 billion per month for programming from cable networks. Included in the memo is a chart detailing the average per-subscriber/per-month fee that cable operators pay cable networks for their programming. (The fees range from 6 cents for the Learning Channel to 36 cents for TNT and ESPN, per Padden, citing figures from Paul Kagan Associates.)
Padden urged Fox G.M.s to “think about our ratings and market value as compared to these other (cable network) services, and position your station on the list where you think you belong.”
Affils should consider that Fox’s TV programming budget is “in excess of $ 600 million,” per Padden, a figure he said “dwarfs the (combined) program expenditures” of cable webs TNT, ESPN, CNN, Nickelodeon, USA Network, Arts & Entertainment, Lifetime, Court TV, Family Channel, the Discovery Channel, CNBC, BET and the Learning Channel.
Padden noted that cable operators throughout the U.S. already are paying 12 cents per sub per month for the Fox Net service.
Fox Net, which is carried in more than 1.5 million cable homes, is a 22 -hour-a-day service consisting of Fox network programs and other shows. Padden said the service is “significantly less valuable and … less desirable” than the broadcast day provided by local Fox affils.
Padden said “many” cable networks “are not delivering the value for which the operators, and ultimately the subscribers, are currently paying.” Fox’s presence “will help cable operators discipline the ‘free riders’ among the cable networks … that charge a lot and deliver little or nothing,” said Padden.
He urged affils to stress that Fox has a “good working relationship” with the cable industry. Indeed, Fox and TeleCommunications Inc.–the nation’s largest cable multi-system operator–have hooked up to extend Fox programming into “white areas” throughout the United States where no Fox stations exist.
It’s unclear whether Fox’s relationship will remain strong with TCI, however, given TCI topper John Malone’s recent insistence that his company will not pay any retransmission consent costs.