FX scores 7 million subscribers from TW

Regional sports package plays into overall deal

FROM WESTERN CABLE
Rupert Murdoch’s FX cable network has scored its biggest cable-operator deal since it launched in June 1994, grabbing a guaranteed 7 million subscribers from Time Warner Cable over the next three years.

Time Warner had held out for so long because it was unwilling to pony up the 25¢-a-month per subscriber that FX had to charge because of its contracts with other cable operators.

Speaking at a news conference during the Western Cable Show at the Los Angeles Convention Center, Lindsay Gardner, executive VP of affiliate sales and distribution for the Fox Channels Group, said there were two main reasons for Time Warner’s change of heart:

  • As part of the FX deal, Gardner agreed to give Time Warner an unprecedented 10-year contract for all of Fox’s regional sports networks in communities where TW owns a cable system. Cable operators invariably pay more for these regional sports networks than for any other program service because subscribers love their local teams.

    To be sure, FX has secured built-in increases in license fees for the sports regionals over the course of the 10 years, but local-team rights fees could escalate so dramatically between now and 2010 that the contract could look like a bargain for Time Warner.

  • FX has gone on a program-buying binge over the last few years, stocking up on such high-visibility repeat series as “Buffy, the Vampire Slayer,” “Ally McBeal” and “The Practice.” All three of these shows, which become available in the fall of 2001, are produced by FX’s sister company Twentieth TV.

Vying for rights

In original programming, FX recently joined the Fox network, NBC and TBS in renewing a deal as rights holders to NASCAR auto races. FX has also bought the exclusive network window to theatrical movies such as “The Blair Witch Project,” “Boogie Nights” and “Jackie Brown.” FX will share the network window with the Fox network on theatrical titles like “American Pie,” “The X-Files,” “The Full Monty” and “Starship Troopers.”

Gardner says Time Warner already carries FX on systems representing about 3 million subscribers. By the end of 2002, an additional 7 million TW subscribers will start getting FX, which represents about 80% of TW’s 12.5 million total.

FX is out of balance in its revenue generation, collecting only about $95 million in ad dollars for 1999 compared with about $170 million in 1999 license fees from cable operators. Typically, the ideal ratio for a successful general entertainment cable network is 65% of total income from advertisers and 35% from subscribers.

But Peter Liguori, president of FX Networks, said the ratio is starting to change. FX’s primetime ratings have jumped by 18% during the fourth quarter of 1999, he said, and many of FX’s new shows — including a Howard Stern-produced satire of “Baywatch” called “Son of the Beach” — are shows aimed at young adults, which fetch a premium on Madison Avenue.

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