As we reported last week, News Corp. and Cablevision are in the middle of a carriage dispute. Unfortunately, the two sides could not come to an agreement by the deadline, so News Corp. pulled the affected channels for Cablevision’s three million or so customers, most of whom are in the New York-metropolitan area, the largest media market in the country.
Among the channels pulled is Fox Business Network, along with Nat Geo Wild, and of course the local Fox station, WNYW.
Pulling the plug meant that Cablevision customers missed two games of MLB’s National League Championship series, as well as Sunday’s New York Giants football game.
The dispute showcases the messy side of what makes the cable news business so successful: carriage fees.
As we have written, the cable business is based around subscription fees, which every cable or satellite customer pays as part of their monthly bill. It is these fees that allow CNN to remain immensely profitable, even while its primetime ratings struggle.
For a new network like FBN, which is still unrated by Nielsen, it can be a pivotal source of revenue.
In this case, the dispute is less about FBN than it is about the Fox broadcast channel. News Corp., like NBC Universal, CBS and Disney, wants to get paid a “retransmission consent” fee by the MSOs for its broadcast station (a good primer on retrans is here). In the past, only cable channels received monthly fees from the operators, now the big broadcasters want in on the dual-revenue stream.
Because Fox is home to the World Series, NFL football, the 2011 Super Bowl and “American Idol,” News Corp. decided now would be a good time to dig in its heels and maximize its leverage against Cablevision. It bundled in its two newest cable channels, FBN and Nat Geo Wild, to try and maximize their carriage fees as well.
FBN currently gets an average of $0.11 per subscriber per month, according to SNL Kagan. By comparison CNBC gets $0.29 per month.
Unfortunately, it looks like the two companies are in it for the long haul. With the Giants game blacked-out, the next major event will likely be game one of the World Series October 27… which could very well feature the New York Yankees.
There will likely be two development sfrom this drama:
First, once a deal is reached, Fox, FBN and Nat Geo Wild will get paid more money for carriage, which will be tacked on to Cablevision customers monthly bills.
Second, Congress or the FCC will try to take some sort of action, including the possibility of mandatory binding arbitration.