The Fox News Channel has muscled into the top tier of cable carriage. But it hasn’t scored quite as much money as it first sought.
Channel will more than triple its monthly fee in a new carriage deal inked with Cablevision, the nation’s sixth largest cable operator.
Deal, reached a week after the previous agreement expired, pays News Corp. an average of just over 75¢ per subscriber per month over the course of multiple years. That’s less than the $1 per sub the channel had wanted but nonetheless vaults FNC into the ranks of the five most-expensive national cable nets. (That roster also includes ESPN, TNT, Disney Channel and USA Network.)
New deal between Cablevision and Fox News sets a template for talks with other major cable operators, such as Cox Communications, Time Warner Cable and Comcast. FNC’s high fee also may make things tougher for CNN and MSNBC when they come to the table to reup with cable and satellite operators, who already feel they’re getting squeezed by the news nets. CNN currently gets about 44¢ per subscriber, MSNBC 15¢.
Cablevision was the first cabler to carry Fox News Channel back in 1996, when News Corp. paid millions to secure carriage for its fledgling news net and accepted 10-year deals that paid the web 25¢ per subscriber per month.
That was long before Fox News blew past CNN in the ratings and became a cultural phenomenon behind its “Fair and Balanced” slogan, big personalities like Bill O’Reilly and Sean Hannity and previously unknown anchors like Shepard Smith.
As the expiration dates on Fox News’ carriage agreements began to approach last year, topper Roger Ailes signaled the asking price would be $1 per sub.
Operators shuddered but were resigned to big increases because FNC’s viewers are a loyal bunch: Dropping the channel could cause mass defections to satellite or telcos, which are pushing into an increasing number of markets.
At $1 per sub, Fred Dressler, exec VP of programming for Time Warner Cable, admitted he would have little leverage over Fox News. But he’d consider retaliating by demanding license fee cuts for other News Corp.-owned cable nets, such as FX and Speed, when those contracts come up for renewal.
There’s also a dispute between FNC and the cable operators over the value of the two minutes an hour on Fox News that the operators get to sell to local advertisers. FNC claims the ops pocket so much money from the two minutes that they end up offsetting a lot of the license fee cost.
But the ops dispute that, saying the network skews older than ESPN, TNT and USA, which reach a larger percentage of viewers in the adults 18-49 and 25-54 demos.
News Corp. is seeking carriage for a new offering, Fox Business Channel, as well as retransmission fees for the Fox network, but those were not included in the FNC deal.
FNC, one of News Corp.’s most profitable and fastest-growing business units, earned $235 million in operating income with 35% margins in the fiscal 2006 year ended June 30, according to a Merrill Lynch estimate. Merrill analyst Jessica Reif Cohen predicted 15% annual revenue growth even with a 50¢ affiliate fee, which FNC has significantly exceeded.
Deal, negotiated personally by News Corp. prexy Peter Chernin and Ailes, sets Fox News’ carriage fee higher than that of the USA net, which gets about 60¢ a month, and just lower than TNT at 89¢ and Disney Channel at 79¢.
The cabler with the highest fees, ESPN, takes in an off-the-charts $2.96 per subscriber per month, according to Kagan Research, the result of tough talks in 2004 that saw heated battles with Charlie Ergen’s Dish Network and Cox Communications.
A FNC rep declined to comment on the specifics of the deal. Cablevision also declined to comment except to say, “We are happy with our new deal with Fox News Channel.”