TW Cable to cede space on its systems
NEW YORK — The battle for cable carriage in New York between Time Warner Cable and Rupert Murdoch’s News Corp. — one of the most acrimonious legal fights ever waged by media companies — will end today with the announcement of an out-of-court settlement.
That’s the word from insiders, who said Time Warner has agreed to carry Murdoch’s FNC (Fox News Channel) nationwide on cable systems representing close to 8 million subscribers reaching 65% of the U.S., including TW’s New York City system.
The NYC system last year refused to take FNC, and the city attempted to force TW to accept the new news chan-nel. TW sued Fox and the city government. Fox filed an antitrust suit against TW; the latter trial was in discovery and scheduled for trial in five months, but will be rendered null and void by the settlement.
The legal confrontations sparked public name-calling between Murdoch and the vice chairman of TW, Ted Turner.
“This deal puts us well on the way to profitability,” said Roger Ailes, CEO of FNC, clearly jubilant at the guar-antee of up to 8 million more subscribers, which TW has agreed to hand over to the channel in a gradual rollout over the next three years.
Sources said Murdoch will have to pay at least $10 a subscriber for the TW Cable sub base. But Murdoch will get that money back from TW within four years based on monthly per-subscriber license fees that the cable systems will have to pay, which will increase each year, according to sources.
While Fox was celebrating, some executives at TW’s cable systems, who requested anonymity, were using phrases like “a sacrifice of moral principles” and “a blatant cave-in.” These executives said Turner is hopping mad because TW kept him in the dark until the parties agreed to the deal, fearing that he’d mouth off publicly against the arrangement.
A TW spokesman said the company would have no comment on the deal.
Fox executives are convinced that TW Cable reneged on an alleged verbal agreement to carry FNC last year because Turner did not want any further all-news cable competition for CNN and Headline News, which Turner founded and which became a TW property when the company bought out Turner Broadcasting last year.
The morale among some TW Cable executives is low because, in their view, TW had won the first two rounds: in federal district court and in the second circuit court of appeals. Both of these courts stopped the city government under Mayor Rudolph Giuliani from ramrodding FNC onto TW’s Gotham system by briefly freeing one of the five city channels for use by FNC.
Peter Powers, chairman of High View Capital and the go-between who helped broker the deal (he was first deputy mayor under Giuliani until last year), said one of the main reasons both sides ended up agreeing to the deal is that the city will make available one of its channels for FNC.
No tiers for Fox
So TW’s Gotham cable system won’t have to throw off an existing commercial cable network to accommodate FNC. Sources said Fox found another alternative unacceptable: TW’s adding FNC to the new, separately priced, 12-channel tier it will start to add throughout the five boroughs in September. Fox reportedly felt that the tier was unlikely to come anywhere near reaching the entire subscriber base that the city channels have access to.
However, one source said a big plus for TW under the settlement relates to all of its cable systems in cities where Fox owns TV stations it bought last year from New World. These systems will take FNC in exchange for permis-sion to continue carrying the former New World stations, an arrangement that’s known in industry jargon as re-transmission consent.
TW’s point man for the negotiations was Richard Parsons, president of Time Warner Inc., while Fox’s were Chase Carey, chairman-CEO of Fox Television, and Arthur Siskind, News Corp.’s top lawyer.
Over the last two weeks, FNC has taken full-page ads in major newspapers to boast that it’s running gavel-to-gavel coverage of the Senate hearings into campaign-fund abuses, while CNN and MSNBC are, for the most part, ignoring them.
An editorial in Tuesday’s New York Times said TW Cable is guilty of “an abdication of its journalistic and civic responsibilities” for not carrying the hearings on CNN, while keeping off its systems the one network, FNC, that is running them.
The FNC settlement is sure to lift News Corp.’s standing on Wall Street, where the media conglomerate has been out of favor for several months because of its spending on acquisitions and start-up businesses such as Fox News Channel.
News execs told analysts earlier this year the company would invest $450 million in Fox News through fiscal 1998, and didn’t expect it to break even until 1999-2000. The Time Warner settlement doesn’t necessarily bring forward the timetable for breaking even, because TW has three years to add Fox News to all the extra systems, but the deal makes it likelier the channel will break even at the predicted time.
“Its a rocket as far as subscriber growth that people weren’t anticipating,” said NatWest securities analyst Gary Farber.
“It’s a coup” for News Corp., Farber said, adding that other cable operators would be more likely to decide to carry Fox News and increase its subscriber count even further. But he questioned the high price News Corp. was paying to get Time Warner’s agreement.