Posted by: Tom Lowry on December 31, 2009
As surely as the ball drops in Manhattan’s Times Square, another certainty on New Year’s Eve now seems to be that a tv programmer and a cable distributor will be locked in a public feud over money that almost certainly goes right down to the wire at midnight.
This year’s warring contenders are executives from News Corp.’s Fox Network and those from Time Warner Cable, the country’s second largest cable operator with 14 million customers. Fox is threatening to pull its programming at midnight tonight and leave those subscribers staring at black on their flat screens unless Time Warner Cable agrees to pay Fox a buck a month for every subscriber.
These kinds of disputes are nothing new. Time Warner Cable and Viacom did the same dance last New Year’s Eve before an 11th hour resolution was worked out.
But even if Fox and Time Warner Cable iron out a deal before midnight, the year-end spat may just have greater repercussions this time. The two sides may see negotiating in public as a necessary tactic, but being front and center with consumers, and pandering politicians, could come back to bite them.
Whatever Time Warner Cable agrees to pay Fox will surely be passed on to subscribers in their monthly bills. Consumers are already fed up with escalating cable bills, threatening to drop their service and instead watch free video offerings on the Internet. In this economy, the possibility that cable bills will rise even further can only mean that a campaign to mandate something called the a la carte model will be rekindled. Under this model, subscribers would have the choice of receiving, and paying for, only the channels they want. That may mean you would only get 30 channels instead of 500, but they would be the channels you know you will watch on a regular basis. If the Internet has taught consumers anything, it’s that choice on their own terms is a great thing. If, once the dust settles and Fox gets anywhere near a buck, the battle with Time Warner Cable may serve to push frustrated consumers to the breaking point.
A la carte was a big deal about five years ago when then-Federal Communications Commission Chairman Kevin Martin supported giving consumers this choice. Cable companies and programmers vehemently opposed a la carte, saying it would destroy the economics of their business. By unbundling cable offerings and fragmenting audiences, they argued, advertising rates would plummet and niche programming could not be supported. At the same time, distribution fees would rise even more, they posited.
Congressional hearings were held on the matter, but the a la carte debate faded away after Martin’s FCC reports on subject were called into question. The current FCC Chairman Julius Genachowski, busy with plans to expand broadband access in the country, has said little about his position on a la carte. But with politicians like Sen. John Kerry taking a deep interest in the Fox- Time Warner Cable standoff (he’s threatening to intervene to make Fox stay on the air), can it only be a matter of time before Congress along with consumer groups make a la carte headlines once again?
The media, entertainment and marketing worlds continue to shapeshift on a near-daily basis, as new forms arise and old assumptions erode. Where is it all going? No one really knows. But on this blog BusinessWeek’s media writers Tom Lowry and Ron Grover promise to provide ample helpings of scoop, provocation, and sharp analysis as they track and annotate this constantly changing terrain.