Net agrees to share non-linear revenue

Fox has sealed a new deal with its affiliates that finally allows it to enter the iPod age.

The six-year pact — an extension of affils’ previous agreement to contribute to Fox’s costly NFL rights package — dramatically increases the amount of programming the net can repurpose on the air and distribute over new media platforms, such as the Internet.

Stations will share in any revenue Fox receives from posting programming on “nonlinear” media, such as iPods, Web sites or on-demand.

Affils have already ratified the new pact, which goes into effect immediately. In practice, that means many of the Fox shows most popular with the under-35 set, including “24,” “Family Guy” and especially “American Idol,” could hit iTunes and other on-demand outlets very soon. In addition, the network undoubtedly will use MySpace and IGN, its sibling Netcos acquired by News Corp. last year, to start inhouse online distribution.

Moving forward, Fox this year will be able to repurpose 60% of its primetime programming on ancillary distribution platforms, followed by 80% next year and a full 100% in year three of the deal. Affils will receive 12.5% of the revenue from any program that runs on a nonlinear platform after its primetime broadcast run and 25% of revenue from shows that hit the nonlinear world before airing on the network.

Fox execs said they hope to explore the full range of digital business models, including pay-per-episode a la iTunes, monthly subscription and advertiser-supported free streaming, as ABC is about to start doing on its own Web site.

“I think you’ll see us over the next few weeks or months make some additional announcements in terms of what we’re going to do with our content,” said Peter Levinsohn, president of digital media for the Fox Entertainment Group.

Due to affiliate restrictions, Fox has thus far been the most conservative of the Big Four nets online. Net has primarily experimented with nonlinear repurposing in markets where it owned its stations. Fox’s cable sibling FX has been slightly more innovative, allowing another News Corp. subsid, DirecTV, to offer episodes of “The Shield” and “Rescue Me” for $2.99 before they aired — an industry first.

“We were limited in terms of volume and how quickly you could make it available,” said Jon Hookstratten, Fox’s exec VP of network distribution. “That prevented us from doing some things that could have been done over the past couple of months.”

The Fox deal is the first between a network and its affiliate body to extensively hammer out parameters on programming to be distributed on alternative platforms such as the iPod or on-demand. Some specifics of the deal — such as whether programming will show up on individual stations’ Web sites — still need to be ironed out.

“We now have complete flexibility to repurpose content broadcast on the network in a way that takes advantage of all of our new-media opportunities,” Levinsohn said. “The beauty of this deal is that we have created a structure with affiliates that makes them our partner. It’s a symbiotic relationship between network affiliates and content companies to maximize value.”

Pact stands in marked contrast to other nets that have made on-demand deals without the involvement of affiliates. ABC, for instance, has yet to work out whether and how it will include its affiliates in advertiser-supported streaming of shows the day after they air on its Web site in the fall (Daily Variety, April 11).

Deal was hammered out by Hookstratten and Levinsohn, along with Fox affiliate board leader Brian Brady, president-CEO of Northwest Broadcasting. Fox TV Network president Ed Wilson and Fox Networks Group prexy-CEO Tony Vinciquerra also took part in drafting the arrangement.

As for more traditional TV repurposing, Fox will be able to repurpose six hours a week of programming elsewhere on the dial (including sibling cable nets like FX) — and shows will be available for rebroadcast the day after they run on Fox. (Previously, Fox could repurpose only four hours of programming per week — and not until a week after air.) Fox also will be able to run marathons of its shows (such as “Prison Break”) on other channels up to six times a year.

Fox affils have helped contribute to Fox’s pricey NFL deal for several years by buying back a set number (between 90 and 105) of 30-second spots a week. That’s unchanged under the pact extension, although Brady said the stations still hope to renegotiate that buyback program.

(Ben Fritz contributed to this report.)

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