Time Warner Calls for 'Cooling-Off' Period Before Fox Pulls Programming

Dec. 31, 2009 — -- Time Warner Cable today called on Fox to agree to a 30-day "cooling-off" period as the two media giants go down to the wire in negotiations on broadcast fees that could affect millions of cable TV subscribers.

Fox parent News Corp. has threatened to pull its content from Time Warner Cable customers, including hit shows such as "American Idol," "House" and the NFL playoffs, if the two sides don't reach a new agreement by midnight tonight.

A News Corp. spokeswoman said the company had no comment on the "cooling-off" period request, which was initially proposed by Congressman Steve Israel, D-N.Y.

In a statement released today accepting Israel's proposal, Time Warner Cable, the No. 2 U.S. cable operator with 13 million subscribers, said customers shouldn't be caught in the middle of negotiations.

"Time Warner Cable accepts the Congressman's proposal and urges Fox to do the same. Our customers should not be held hostage over a business negotiation, and we implore Fox to not make America's living rooms a corporate battleground," Time Warner Cable spokesman Alex Dudley said in the statement.

Federal Communications Commission Chairman Julius Genachowski has also urged the two companies to extend their negotiating deadline, noting, in particular, the hardships faced by football fans. Fox is slated to air the Sugar Bowl, featuring the Cincinnati Bearcats and the Florida Gators, Friday night.

"Companies shouldn't force cable-watching football fans to scramble for other means of TV delivery on New Year's weekend," Genachowski said.

Two Gators fans this week asked a Florida court to issue an injunction forcing Fox to broadcast the Sugar Bowl regardless of whether a Time Warner deal was reached, but a judge today denied that request.

News Corp. reportedly asked for an increase of $1 per month per subscriber, which would hit Time Warner Cable with a $13 million monthly rate hike.

News Corp. CEO Chase Carey sent a memo to his staff on Thursday indicating little hope that a deal will be reached.

"At this time, it looks like we will not reach an agreement and our channels may very well go off the air," Carey wrote in the memo.

Cheap Access to Fox Shows?

Carey added that any extension to the negotiations simply would give Time Warner more cheap access to Fox shows.

"The fact is we've been trying since the summer to negotiate a fair deal and that further extensions simply extend the period of time that Time Warner profits from our marquee programming," Carey wrote.

The public spat began in November, when Time Warner Cable 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."

This week, Time Warner Cable started running dramatic ads in ransom-style lettering in newspapers around the country.

"Pay our price or you'll never see Fox again," reads a Time Warner Cable ad.

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

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

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

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 like Fox, meanwhile, have seen advertising revenues drop because of 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, said 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," said Time Warner Cable's Dudley. Programmers, he argued, already get their fair cut.

Time Warner Cable recently split off 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.