Fox comes to terms with affils on ad biz

Both sides concede as new plan is intro'd

NEW YORK — Fox and its affils have declared a truce in their war over the net’s controversial plan to take back a huge chunk of commercial inventory.

Under a new proposal greenlit by the Fox affil board Thursday, Fox will still technically recapture 20 30-second spots that had previously been local ad time (Daily Variety, April 29). The net will then sell those ads back to stations for a flat fee based on their market value.

In addition, Fox will convert 15 national spots into local spots to be sold by stations for whatever the market will bear. Stations will pay a flat fee for those spots as well.

Neither side will spell out what the flat fee is, though insiders say the net figures to gross $50 million-$75 million from the station payments. Counting revenue that will move from the Fox-owned stations group to the Fox network — essentially, from one Fox pocketbook to another Fox pocketbook — that figure could go as high as $105 million.

The original plan would have cost stations as much as $100 million to $150 million in ad revenue, according to industry estimates.

Fox made concessions

In a concession to stations, Fox has agreed to maintain local ad inventory at current levels for the next three years, something the web has never done before.

The old plan also had stations selling local inventory and giving Fox 25% of the average sum of those sales, a process affils felt was too cumbersome.

Except for those two changes — and the net financial impact on stations — the structure of the new compromise is identical to the compromise Fox offered stations when it first announced plans to back the inventory.

Net’s gain

Fox Television Network prexy Larry Jacobson said that despite the rancor of the past two months, in the end, both sides came to a fair settlement that will help the network thrive.

“What we were asking stations to recognize is the changing state of the business,” he said, noting that, ultimately, affils did just that.

“We have a group of forward-thinking owners … whose main goal is winning and dominating broadcasting in the future,” Jacobson said. This deal “puts us in a stronger position.”

Murray Green, chairman of the Fox affil board and VP, station development for Raycom Media, said hammering out the deal “was no walk in the park” and that the two sides “started out at an outrageous place” following Fox’s original announcement. Green also conceded that the agreement was far from perfect from the affil point of view.

“Nobody’s going to be overjoyed when you’re paying out money,” he said. “A lot of the affiliates were quite upset by the network’s original presentation (of the plan) … But we realize what some of the network’s problems are.”

Affils still must agree to the proposal on a station-by-station basis, but Jacobson and Green sounded confident that most would agree. Smaller stations with weaker ad markets may be the most reluctant to go along, but may also have the least options in terms of litigation or trying to switch affiliations.

Kevin O’Brien, of Cox Broadcasting-owned Fox affil KTVU in San Francisco, said he wanted to study the specifics of the plan before offering an evaluation of it. Nonetheless, “It’s good for both sides that we came to an agreement,” he said. “I doubt that litigation would have been beneficial to Fox.”