Fox, Time Warner Feud Could Black Out Cable Viewers

Dec. 29, 2009 — -- A bitter spat between Fox and Time Warner Cable could soon leave viewers around the country without the network's programs including January's NFL playoffs and "American Idol."

Fox and Time Warner Cable, the No. 2 U.S. cable operator, are in the midst of negotiating a fee contract which expires Dec. 31. News Corp., owner of channels such as Fox Broadcasting, FX and Fox Sports, is threatening to pull its programming from Time Warner subscribers if there's no fee deal. Time Warner, meanwhile, is fighting back with ads that accuse Fox of blackmail.

"Pay our price or you'll never see Fox again," reads a dramatic Time Warner Cable ad in ransom-style letters in newspapers around the country.

"No Fox? No Way," read News Corp.'s ads over a collage of pictures from its hit shows, including "NFL on Fox," "American Idol," "24," "House" and "The Simpsons."

News Corp. is reportedly asking for an increase of $1 per month per subscriber. With 13 million subscribers, this would hit Time Warner with a $13 million monthly rate hike. News Corp. didn't return calls from ABC News seeking comment, but Time Warner Cable said the hike would directly filter through to viewers.

"Fox's current demands are still unreasonable and excessive, especially in this economic climate," says Maureen Huff, a Time Warner Cable spokeswoman. "We hope Fox won't punish our customers by taking their programming away while we try to reach an agreement."

This latest outburst of hostility isn't the first salvo in the dispute. In November, Time Warner launched an ad campaign airing its grievances against programmers and asked viewers to vote on whether Time Warner should "roll over" and cough up the higher fees, or whether it should "get tough."

If Fox pulls its content in January, it wouldn't be the first time a programmer uses viewers -- who usually direct their anger at their cable company, not the content provider -- as a pawn in negotiations.

"It's an ongoing war. Distributors want as much of the money as possible, and the people who create the content want their share," said Carl Howe, director of media consumer research at the Yankee Group.

Tough Times for TV

The dispute comes at a difficult time for both companies. Cable operators such as Time Warner Cable are beginning to lose leverage with their customers because more Americans are getting their content for free on Internet sites such as Hulu. Programmers such as Fox, meanwhile, have seen advertising revenues drop due to changes in the advertising industry and the recession.

To replace lost income, programmers have begun asking cable distributors for a higher cut of subscription revenues. Time Warner Cable, which has several contracts in addition to the Fox deal expiring at the end of the year, says that some programmers have asked for fee increases of up to 300 percent.

"When a programmer comes to us and asks us for a 300 percent price increase for their content, that's what causes your cable bill to go up," says Alex Dudley, a spokesman for Time Warner Cable told ABC News.com recently, arguing that programmers already get their fair cut. (Time Warner Cable is now separate from its former parent Time Warner Inc., which owns Time Magazine, CNN and Warner Brothers.)

Last year, Time Warner received $16.3 billion from subscribers, and paid $3.7 billion -- almost a quarter of that -- to content providers such as Fox. While that seems like a small percentage, cable operators point out that maintaining a national network to deliver content is costly.