Fox Inc. will launch an entertainment-based cable network by January 1994 that will reach the 10 million subscribers to services owned by Tele-Communications Inc.
As part of the deal, Fox will allow TCI to continue carrying its seven owned TV stations without extracting “retransmission consent” payments, which are part of the new cable law that goes into effect next month. The deal allows cable giant TCI to stick to its avowed position that it will not pay stations to carry their signals, while still finding a creative way to compensate Fox stations.
At Wednesday’s teleconference for the press from TCI’s Denver headquarters, Fox chairman-CEO Rupert Murdoch said TCI will pay Fox a monthly fee of 25 cents a subscriber to carry the new network. That boils down to $ 30 million a year to Fox over the five-year life of the deal.
In addition to TCI, Murdoch said Fox has started “negotiating identical deals” with other big multisystem cable operators.
One station source said Fox will hold out for the 25 cents-a-month figure because of a “favored-nations” clause in the TCI contract, which states that if another MSO signs up to pay a lower price, TCI’s fee would immediately drop down to that lower number.
For Fox affiliates who want a piece of the deal, Murdoch said Fox would funnel 7 1/2 cents of that 25 cents monthly fee to the stations, which would then agree not to ask TCI for retrans-consent money.
“But if one of our affiliates wants to negotiate directly with the cable operator” for retrans payments, he continues, “that station is free to do so.” Stations must choose between “must-carry”– an assurance they will be carried on cable systems sans compensation — or retransmission negotiations, where they seek fees for their signal, but risk losing cable carriage.
No ‘Fox’ moniker
Very little information about the new network came out of the news briefing after earlier reports (Daily Variety, May 10). It doesn’t even have a name yet, and one source says the word “Fox” will not be in the logo because Murdoch “doesn’t want to do anything that would blur the identity of the local Fox affiliate.”
Murdoch said Fox will spend “in excess of $ 100 million in the first year” for programming on the new network. Fox would try to pitch the programming to the 18-to-49-year-olds who are the bedrock of the Fox broadcast network.
“We’ll use movies from our library,” he added, and off-network series that Fox’s Twentieth TV division produces for ABC, CBS, NBC and Fox. If Fox had run its own cable network three years ago, Murdoch said, it would probably not have sold reruns of “L.A. Law” to Lifetime. He also said there’ll be lots of original programming in the mix, although he declined to provide any details.
Brendan Clouston, chief operating officer of TCI, said Fox will have a strong incentive to schedule audience-pleasing shows on the new service, because if the Nielsen share of the network climbs above a 2, TCI will pony up more money to Fox.
High ratings will also give direct benefits to the cable operators because Fox will make available three minutes within each hour for sale by the systems to local advertisers. (Most of the mass-circulation basic-cable networks provide operators only two commercial minutes an hour.)
One strategy for cable operators, said John Malone, president and CEO of TCI, would be to give the new network a dial position adjacent to the one carrying the Fox network and “cross-promote both channels. This would be an excellent way to motivate local ad sales.”
Murdoch said the “critical mass” at which the new network would become profitable is a subscriber count of 40 million homes. Fox hopes to reach that total within 2 1/2 years, he added.