News Corp. chief operating officer Chase Carey said that the media giant is on the cusp of a retransmission- consent revenue windfall that could ultimately fix the broken broadcasting model.
On a conference call with analysts to discuss its fiscal second-quarter results, Carey said that News Corp.'s owned- and-operated stations have completed retransmission-consent deals with two of the top 10 distributors.
Fox reached a highly publicized last-minute retrans agreement with Time Warner Cable on Jan. 1, involving stations in cities including New York, Los Angeles and Dallas. While neither side would reveal the ultimate price, sources in the affiliate sales community have said Fox reached a six-year deal that escalates from 50 cents per subscriber per month initially to $1 per subscriber per month in the final year.
Carey wouldn't quantify how much retrans could mean to the company but said that the TWC deal was a "transformational event."
Carey estimated that about half of News Corp.'s station deals will expire in the next two years, not including similar deals that will run out for its affiliate stations. News Corp. has expressed a desire to get involved in those negotiations too.
When asked if retrans fixes the broken broadcast model, Carey said that was an overly simplistic view.
"It [retrans] puts us on a course where we can generate the profits we should if we run a good network," Carey said. "Simplistically you could say it fixes it. It certainly puts it in a competitive place where it has a dual revenue stream like successful cable networks do and those that it increasingly competes with."
Late last year as the Time Warner Cable battle raged, Carey had compared Fox programming to that of ESPN -- which garners monthly per subscriber affiliate fees of between $4 and $5 -- noting that Fox shows have more viewers and higher ratings than the sports channel. The COO stopped short of that number during the earnings call, adding that the company is mindful of its relationships with distributors.
"We want to get fair value for our content, but in all honesty we tried to approach this constructively," Carey said. "We built businesses with them we built valuable cable channels. We have enormous value in the Fox network, we felt the right thing to do was to take a big step forward and get the value of the Fox network content recognized. Could you argue it's worth more? Sure. But there are a lot of issues involved."
News Corp. chairman and CEO Rupert Murdoch was a bit more blunt in his assessment of the situation, noting that cable operators can afford the added costs.
"The big cable companies are making really great operating profits," Murdoch said. "What we're asking for and even if our network competitors ask for the same and get the same, it certainly is not going to kill the cable companies -- maybe 10% of their operating profits, which they will have two or three years to pass through."
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