Fox says mea culpa, trims affils’ ad bills

Net will determine fate of kids block by January

PHOENIX — Fox extended an olive branch to affiliates Tuesday, offering its smaller affils some financial relief and forming a subcommittee to determine the fate of its afternoon kids block by January.

Speaking to station heads at the web’s summer affiliates meeting, Fox Television chairman-CEO Chase Carey offered mea culpas for the approach the network took when negotiating its controversial affiliate ad buyback plan.

“I am certain we could have handled some things better, and individual market-to-market inequities may have emerged,” Carey said. “For that I do apologize. And yet the reality is that it is almost impossible to find the perfect path and relative balance among 200 affiliates.

“That is not an excuse, and we recognize we must improve our partnership.”

The network will reduce the amount of reverse compensation affiliates owe the network by $5 million next year — to $50 million — and restructure the deal so that larger stations shoulder more of the pay-back burden. Stations paid $50 million this year as well; the additional $5 million was part of a prenegotiated increase.

“We took a step to help out because clearly we have bigger fish to fry,” Carey said. “I think it’s a recognition of those smaller markets in the past year having had some challenges. We’re trying to be sensitive to that as we are in a partnership.”

Fox execs will meet with affiliate board leaders to determine how much each station owes. WXIN-TV Nashville, Tenn., exec Linda Gray, vice chair of Fox’s affiliate panel, said the move was unexpected.

“We proposed the idea, thinking nothing would come from it,” Gray said. “They didn’t have to do that, so it was appreciated.”

Under the ad buy-back plan, which was ratified by a majority of stations last year, Fox took back 20 (out of 90) local spots a week and then resold that time back to affils. Stations were then given an additional 15 local spots (for a total of 105).

Financial burden

Deal brought in more revenue for big-market stations, which were hungry for more ad time, but became a financial burden for stations in tiny markets that couldn’t sustain the additional time.

Meanwhile, the network sped up action on the future of Fox Kids Network, which has underperformed in weekday afternoons in recent years. Carey promised stations in January that the programming block would be evaluated next January, but the decision to create a committee to look into the future of Fox Kids might speed up that process.

Whatever the ultimate decision, Fox has a 10-year deal with stations to hold on to Fox Kids’ 3-5 p.m. timeslot.

“Clearly the kids advertising market has really disappeared enough that that’s a challenge for these affiliates,” Carey said. “We’ve committed to a broader review of what we’re doing in the kids business by January. We’re acknowledging it’s a problem. We need to find a way to make it more acceptable to both of us.”

Digital plans

As for digital, Chase said he hopes to have the first stages of a Fox plan in place by September. News Digital Systems, the tech company of Fox parent News Corp., will be involved heavily in formulating those proposals.

“We still have more questions right now than answers,” he told affiliates. Speaking to reporters later, Carey stressed that the network is still far from developing “some grand plan.”

“To force something before it evolves may be a license to throw money away,” he said.

Net execs again stressed to affiliates that they shouldn’t mortgage their digital spectrum to companies other than Fox.

“To hand this spectrum off to a third party potentially compromises both of our futures,” Carey said. “These third-party players like I-Blast and Geocast don’t have the answers. They are simply aggregating spectrum to try to buy time and figure it out the same as anyone else. Entering into these partnerships is tantamount to turning your entire investment in local infrastructure and time periods over to digital syndicators.”

Overall, the mood between network and affiliates was one of reconciliation.

“Fox is starting to listen to our concerns and take our partnership more to heart,” said James Smith, president of Kris Communications (which owns Corpus Christi, Texas, affil KDF). “In the past, it was Fox’s way or no way. But in the new digital age, we do have a lot to offer. It may be the new strength of the affils.”

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