Retrans Spat Goes Upstream: Crazy Like a Fox?

The next time you tune into your local Fox station and its not there, it may not be because your local cable operator was unable to reach an agreement for retransmission consent of its signal. News broke this week that Fox network has been in discussions with its affiliate group to obtain cash for carriage of network programming on their stations. Apparently the talks are not going well and Fox Network is starting to talk to the affiliate stations directly to reach deals. The affiliate board is accusing the network of taking a “divide and conquer” approach. Meanwhile, Fox asserts that they are just trying to get a deal done before they have to pursue “different distribution channels”. Things are getting contentious and now the negotiations are starting to play out publicly as if this was a battle between the stations and a local cable operator.

It seems that the proverbial shoe is on the other foot and the affiliates are none to happy about it. With most of the affiliates having retransmission consent deals in place with local cable operators and the two national satellite providers, the last thing they need is the network asking for a piece of the action that hasn’t been budgeted for. All this comes at a time when a deal between Fox and Time Warner Cable provides a workaround for the big MSO to get the network programming for up to a year should they encounter an impasse with a local Fox affiliate - lending credence to the “different distribution channels” threat.

To be sure, Fox COO Chase Carey has not been shy in saying that the network will pursue these kinds of retrans revenue sharing arrangements, so it should have come as no surprise to the affiliates. All the same this comes off as another instance where a broadcaster makes the spurious argument that they need subscriber revenues to flow back to them in order to “preserve free broadcast TV” all because they are seeing viewership continue to migrate to cable networks and more time spent online, undermining their advertising based business model.

Yes, this is a private business negotiation, but with TV a seemingly American birthright anything that results in viewers being deprived of network programming inevitably becomes a public policy issue. With retransmission consent having such a high profile, and the FCC slated to take it up at its March meeting, one wonders whether this is the wisest time for Fox to be pursuing this so aggressively. In the end, the affiliates will come to an agreement because they need the programming and Fox can’t pull the plug on a wholesale basis without the risk of being called in front of House and Senate panels to answer for its actions. Inevitably it all flows back to the consumer in the form of higher cable and satellite rates, putting even more pressure on consumers who are on the verge of “cord cutting”.

At this point, the rest of the “Big 4” are sitting back to see how this develops. While there are still a lot of unknowns as far as how this will play out, one thing is for certain, if this proves successful for Fox, watch for the rest to follow suit.