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  1. #1
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    Fox Retransmission fees articles

    Fox TV demands share of stations' retransmission fees

    The network wants local affiliates to pay it a percentage of the money they get from local cable operators that retransmit their signals.

    February 12, 2011|By Joe Flint, Los Angeles Times

    The Fox TV network, looking for new sources of revenue, is demanding that its affiliates hand over a percentage of the money they receive from local cable operators that retransmit their signals.

    And if they don't hand over the cash, Fox is threatening to yank the local station's network affiliation and find another outlet in the market.

    That, in a nutshell, is the situation now unfolding between Fox and local TV stations around the country that carry the network's programming. It also points to the complicated and often conflicting relationships among media companies local TV stations, broadcast networks and cable systems as they jostle one another for a cut of the money pouring into local cable and satellite companies from customers.

    At issue is the money called retransmission fees local Fox stations get from cable and satellite operators to carry their signals. Fox, which already gets retransmission fees for TV stations the network owns including KTTV-TV Channel 11 in Los Angeles, is pressuring its non-owned affiliates for a big cut of the revenue.

    Broadcasters used to be content with the money they took in from advertisers, which supported "free" over-the-air television. But in recent years as broadcasters have lost viewers to cable and advertisers are shifting to the Internet, stations have been seeking new sources of revenue by demanding payment from cable and satellite companies for the right to retransmit their programming.

    News Corp.'s Fox is not the only network seeking a slice of its affiliates' retransmission fees. CBS, ABC and NBC are also negotiating for a percentage. However, there is a consensus that Fox is being the most aggressive of the networks. None of the Big Three has yet threatened to drop its local affiliate if it doesn't get the money.

    While the corporate skirmishing is waged far above the heads of TV viewers, it is likely to have a real-world effect on households that pay for cable or satellite service about 90% of all TV-watching homes in the country in the form of higher monthly rates as local providers look to make up the difference.

    Neither Fox nor its affiliates would talk about how much money the network is seeking. But people familiar with specifics said the rates start at 15 cents and peak at 50 cents per local cable subscriber over the course of the contract depending on various factors including the size of a station's market.

    In a letter it sent to stations this week, Fox Affiliate Sales President Mike Hopkins said the network recognized that its "proposal may not work for every company" and "if that should be the case, Fox will pursue different distribution channels ... we don't want that to sound like a threat, but it is a fact."

    Fox station owners said they understood the financial pressures networks face in a media world where viewers now have myriad choices, and said they were comfortable with sharing their retransmission revenue with the network. Affiliates already pay the network for programming through a swap of advertising inventory.

    However, Fox's current demands are seen by affiliates as highly aggressive because it requires them to wrangle more in retransmission fees out of cable and satellite companies and if they fail, reach into their own pockets to make up the difference.

    About 30 Fox affiliates do not have a long-term deal with the network. An additional 80 stations will see their agreements expire by the end of the year.

    "They appear to have no regard for the value your station brings to the network.... They are prepared to destroy someone's business to make their point," wrote Brian Brady, president and chief executive of Northwest Broadcasting and chairman of the Fox affiliate board, in a letter to other Fox stations.

    Fox counters that it provides the bulk of the programming and thus the bulk of the value to its affiliates, arguing that it needs to capture some of their retransmission revenue to continue paying for the costly comedy, drama and sports programming that stations and viewers expect.

    One concern among local affiliates is that they do not have the leverage to negotiate big enough fees from cable operators to cover Fox's demands.

    As a result, some local stations think that if Fox so badly wants a slice of affiliates' retransmission revenue, then the network should negotiate on its stations' behalf directly with cable and satellite operators.

    There is a precedent. In the 1990s, when Congress first gave TV stations the right to negotiate for retransmission fees, Fox affiliates handed the network a proxy to cut deals. Fox used that proxy to bargain in lieu of cash for channel space on cable TV systems to launch the cable network FX.

    This time around, however, Fox is not interested in pursuing such a scenario out of concerns that such a move would raise eyebrows in Washington, people close to the network said.

    Lawmakers and regulators are becoming increasingly angry about contract disputes played out in public over retransmission consent that lead to channels going dark, leaving viewers fuming. And the last thing Fox wants now is to give Washington another reason to scrutinize it more closely.

    Source: http://articles.latimes.com/2011/feb...iates-20110212
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  2. #2
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    Viewers will pay if Fox TV gets affiliates to give up more revenue

    The fight could mean more local blackouts if Fox decides to play hardball. It could mean less public-interest programming on your local station and higher cable and satellite bills.

    March 01, 2011|Michael Hiltzik

    The squabbling between television networks and cable companies over broadcast fees had a brief heyday as a source of suspenseful entertainment for the viewing public. Will ABC cut off the Oscars for Cablevision subscribers as the first spiked heel hits the red carpet? Will Fox black out the Super Bowl for Time Warner customers? Tune in and find out!

    The warring parties typically pull back from the brink before pulling the plug but not always. And for most pay-TV customers, the thrill of being pigeons caught in a video industry crossfire disappeared faster than Charlie Sheen's reputation for self-denial.

    But now the networks are sticking their hands deeper into another pocket that of their own broadcast affiliates.

    What's at issue are the "retransmission fees" that cable and satellite companies pay local broadcasters for the right to carry the latters' signals on their systems. The fees generally come to 10 to 20 cents per pay-TV subscriber per month, industry executives say.

    In other words, if you're a local TV station and your local cable company has 1 million subscribers, it will pay you $100,000 to $200,000 a month to feed your broadcast to its customers.

    All four major networks have been hungering for a piece of the local affiliates' action, arguing that much of what the affiliates are feeding the pay-TV systems is network content.

    But local stations say Fox has taken a far more aggressive stance toward its 186 independently owned affiliates than the other networks have.

    CBS, for instance, has reportedly asked for half the local affiliates' take from cable and satellite. Fox wants a flat rate starting at 25 cents per subscriber per month in the first year of a four-year deal it is pressing its affiliates to accept, and rising to 50 cents in the fourth. That's for stations in the top 125 TV markets; the rate is less for smaller operations.

    That makes a direct comparison difficult, but affiliate owners say that demand is so stiff that the toll could amount to more than some stations actually collect from pay TV. And Fox is threatening to drop affiliates that don't pay up.

    To put it more precisely, Fox told the affiliates it would "pursue different distribution channels to receive fair value for our programming" in cases where it doesn't get what it asks.

    "We don't want that to sound like a threat, but it's a fact," Fox's affiliate boss, Michael C. Hopkins, told them in a Feb. 4 letter. (Actually, it sounds like a threat, not a fact.)

    What's more, the network has the upper hand local stations need Fox's top-rated programs, such as "Glee" and "American Idol," more than the network needs any individual station or group.

    The conflict between Fox and the stations involves broadcast content, not cable channels like Fox News, which are subject to separate network deals with cable and satellite providers. Nor does it involve Fox's wholly owned affiliates, including KTTV-TV Channel 11 in Los Angeles. (Fox also owns KCOP-TV Channel 13, but it carries non-network programming and is not involved in the dispute.)

    But the stakes are still high for you, the television viewer.

    The fight could mean more local blackouts if Fox decides to play hardball with its own affiliates. It could mean less public-interest programming on your local station, if it compensates for its higher network fees by cheaping out on news. It could mean higher cable and satellite bills, because the local affiliates will have to negotiate more aggressively with pay-TV providers to try to recoup their higher expenses. Who pays if your local station charges your cable provider more for its signal? You do.

    It's certainly a reminder of how dumb it was for the Federal Communications Commission to wave through NBC's merger with the cable company Comcast in January. Fox has almost all the leverage in its dealings with its affiliates, even without owning a cable operation. The merged Comcast-NBC will be even more powerful than that.

    "Their current ask is not anything I've found that an affiliate would consider acceptable," Perry Sook, chief executive of Irving, Texas-based Nexstar Broadcasting, says of the Fox proposal.

    Sook, whose company counts eight Fox affiliates among the 34 stations it owns, told me he's especially irked that the network is trying to grab revenues that the affiliates obtained through their own hard negotiations.

    Hopkins' letter was designed to answer an earlier letter to the affiliates from Brian Brady, CEO of Michigan-based Northwest Broadcasting and the head of the Fox Affiliate Board. His Jan. 28 letter accused Fox of playing "divide and conquer" refusing to sit down with the board but trying to negotiate with each affiliate company. This strategy bore fruit in January, when Fox cut a special deal with Maryland-based Sinclair Broadcast Group, which with 20 Fox stations is its largest affiliate group.

    "Fox believes that no station or group alone can withstand their assault," Brady wrote.

    Hopkins, in response, called Brady's letter "offensive" and dismissed his crack about divide-and-conquer as "unfortunate rhetoric." He said he was concerned about "the effectiveness of negotiating with a large body instead of each station or station group individually." That sounds a bit like a factory boss saying it would be "more effective" for him to negotiate individually with 1,500 employees than with a single union committee. In a way, of course, he's right. But it's not very likely that the individuals will come out ahead.

    Fox and the other network owners CBS, Walt Disney Co. and NBC Universal already get retransmission and other payments from cable and satellite firms. These fees cover the signals from both the networks' wholly owned local stations and their specialty cable channels, such as Disney's ESPN, NBC's CNBC and Fox's FX and Fox News. They come to about $30 billion a year, according to authoritative estimates. By contrast, the local broadcasters collect about $1 billion a year.

    Sook says Fox and its affiliates should be cooperating in trying to pump up that $1-billion pie. Fox is playing "a silly zero-sum game of 'you have it, we want it,' " he says. "The discussion should really be about how to make it a $7-to-$8-billion pie."

    Fox says it won't talk about what it calls "confidential" discussions with affiliates. But its executives like those of the other networks are determined to remake their business into one that more closely resembles the cable industry that is, collecting two revenue streams, advertising and subscriber fees. They talk about traditional network economics, based mostly on advertising, as "unsustainable" though you can't tell that from Fox's financial results.

    Its parent, News Corp., reported an operating profit from television of $220 million last year on revenue of $4.2 billion, but it doesn't distinguish between results from its network and its 17 company-owned affiliates, which are in major cities (including Los Angeles). Its cable channels are reported separately, and are much more profitable. In any case, News Corp. has enough spare cash to be paying $675 million to buy Shine Group, a TV production company owned by News Corp. Chairman Rupert Murdoch's daughter Elisabeth.

    That suggests that Murdoch is the kind of dad who loves to embrace his family in a bear hug. Fox's TV affiliates must belong to a different branch of the family; he's inviting them to a knife fight.

    Source: http://articles.latimes.com/2011/mar...ltzik-20110301
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    Retransmission fees at root of Fox's change in affiliates
    Fox moving from KSFX to lesser known KRBK.
    12:00 AM, Jun. 26, 2011

    It's all about the money.

    That's how two media analysts described the sudden switch of Fox television affiliates in Springfield, from the well-known KSFX to virtually unknown KRBK.

    "Over time, the Fox network has climbed to be the most-watched network among adults 25 to 54 in the Springfield market," said Rich Nichols, a media marketing consultant in Springfield.

    "Those are the people advertisers most want to reach. What I find most shocking and interesting is that the No. 1 most-watched network is now moving to a new home on Sept. 1."

    Nichols said KSFX's parent company, Nexstar Broadcasting Group, Inc., battled with Fox over the sharing of lucrative "retransmission fees" that Nexstar receives from cable and satellite companies that carry Fox programming.

    "Fox is saying to the franchises 'we should be compensated for the programming we provide you'," Nichols said.

    "Fox and Nexstar got into uncomfortable discussions about sharing retransmission money and they let it become a breaking point."

    Fox negotiated for nearly a year with Nexstar, before announcing Monday that it was no longer going to be affiliated with KSFX in Springfield.

    Harry A. Jessell, editor and copublisher of TVNewsCheck, a New Jersey-based company that writes about the broadcast industry, said Nexstar began receiving retransmission fees from cable and satellite companies in 2005.

    "From then on the Fox affiliate got all that dough," Jessell said.

    But when Fox and Nexstar began negotiating a new four-year affiliation agreement in June 2010 for the Springfield KSFX station, neither side would yield, Jessell said.

    "Fox was wanting 25 cents per (cable or satellite) subscriber in the first year, escalating to 50 cents in year four," he said. "Nexstar took a hard line with Fox, and Fox took a hard line with them."

    In a February business column, Jessell wrote about two letters he had received between a Fox executive and an affiliate board chairman "that exposed in unusually strong language the disintegration of the retrans sharing talks between the Fox network and its affiliates."

    Jessell has written several stories in recent months about the conflict.

    It's likely that KRBK owner Ted Koplar agreed to share the retransmission revenue stream with Fox, and thus won the Fox affiliation for the 33-county Springfield market, Jessell said.

    He acknowledged he didn't know the contract terms that Koplar and Fox accepted.

    The affiliation switch will be a challenge for KSFX to overcome, Jessell said.

    "To lose your Fox affiliation is a blow to any station," he said. "We're all looking to see what Nexstar is going to do for programming."

    It's not the first time Nexstar has butted heads with Fox over retransmission fees.

    The company gave up its Fox affiliations in Evansville, Ind., and Fort Wayne, Ind., this year rather than pay higher retransmission fees to Fox.

    Jessell said other networks also seek retransmission fees from their affiliates, but none have been as aggressive about it as Fox Broadcasting.

    "What Fox is doing sends a signal to everyone else in the industry," he said.

    Nexstar officials didn't return calls for a comment.

    Source: http://www.news-leader.com/article/2...nge-affiliates
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    Fox, DirecTV in Latest Carriage Dispute
    Fox Wants 40% Hike on Carriage Fees
    by Karl Bode

    Fox and DirecTV are the latest companies to get engaged in an ugly carriage dispute, News Corporation running ads in major papers telling readers they'd be unable to see major sporting events unless DirecTV agrees to pay more money for Fox channels. DirecTV has warned News Corporation they'll pull all Fox channels from their lineup on November 1 if a new deal can't be reached, launching a new website (http://www.ourpromisetoyou.com) with a CEO message to subscribers. According to DirecTV, Fox is seeking a carriage fee hike of as much as 40%. As we've discussed many times in the past, consumers lose either way these deals shake out, paying higher rates regardless of who "wins," with some added service disruption and annoying advertising added for good measure.

    Source: http://www.dslreports.com/shownews/F...Dispute-116715
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    Idaho Station KXTF and Fox Part Ways
    Fox looks for new affiliate in DMA No. 191

    By Michael Malone -- Broadcasting & Cable, 5/21/2012 4:44:01 PM


    Fox affiliate KXTF, located in Twin Falls, Idaho, is splitting with the Fox network over network compensation. The divorce is final July 1.

    KXTF is part of Intermountain West Communications. KXTF general manager Shelley Goings said in a release that the network's affiliation demands exceed what KXTF can afford to pay to be part of the Fox affiliates body.

    Fox confirmed KXTF's departure, and said the network had not made a decision on a new partner in Twin Falls. One Twin Falls TV insider said the affiliation may go to a subchannel of KMVT; KMVT General Manager Chris Pruitt said he could not confirm that at this time.

    KXTF becomes part of a growing group of former Fox affiliates, including Nexstar's former KSFX (now KOZL) Springfield (Mo.) and WFFT Ft. Wayne, and Block Communications' KTRV Boise, that parted ways with the net over affiliation demands.

    http://www.broadcastingcable.com/art..._Part_Ways.php

    ==============

    Sister station KFXP in Pocatello, Idaho, will also lose it's affiliation. They'll both affiliate with ThisTV.

    Since the publication, Twin Falls MyNetworkTV affiliate KTWT-LP, owned by Neuhoff Family Limited Partnership, have been chosen to be the new Fox affilaite. It is still broadcasting in analog, but on July 1st, they'll start broadcasting on digital channel 14, affiliate with Fox and dump MyNet syndicated programming at 10pm.
    Last edited by InMontreal; 06-30-2012 at 09:59 AM.
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    http://www.ctvnews.ca/business/news-...nnel-1.1229635
    ...Fox broadcast network on Monday threatened to convert the network to a pay-TV-only channel if Internet startup Aereo Inc. continues to "steal" Fox's over-the-air signal and sell it to consumers without paying for rights. Anyone with an antenna can pick up a TV station's signals for free. But cable and satellite companies typically pay stations and networks for the right to distribute their programming to subscribers...

 

 

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