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RETRANS END-AROUND AVERTED Fox, Cox Settle Before MSO-Imported Signals

Following pressure from Washington and angry reactions fromsubscribers, Cox Communications Inc. and News Corp. ended their six-dayretransmission-consent war last week.

The two sides cut a deal that put Fox owned-and-operated TVstations back on cable in markets reaching more than 400,000 subscribers -- even as Coxwas crafting a way to get around the dispute by obtaining the programming from otheraffiliates.

The MSO had been exploring, and was taking steps, to importthe signals of Fox affiliates into markets where Fox had pulled its owned broadcastoutlets off cable. Cox would have brought in the distant signals of out-of-market Foxaffiliates via microwave starting late last week.

But Cox didn't need to take that measure after thesettlement was hammered out last Thursday night.

Earlier that day, four U.S. senators wrote to Cox CEO JimRobbins and News Corp. chairman Rupert Murdoch, urging a resolution of the dispute thataffected a system in the Washington, D.C., suburb of Fairfax County, Va. Fox'ssignals were restored to Cox Thursday night.

The letter -- signed by Sens. Mike DeWine (R-Ohio), HerbKohl (D-Wis.), George Voinovich (R-Ohio) and Patrick Leahy (D-Vt.) -- offered a veiledwarning to the corporate chieftains.

The senators wrote: "While we recognize that this is acommercial dispute, we are nonetheless troubled by what appears to be a lack of concernfor the consumers who make both of your businesses possible. These consumers rely uponcompanies such as yours to bargain in good faith and reach sensible agreements Ifbroadcasters, cable companies and satellite companies do not approach their negotiationsin that spirit, the entire structure of retransmission consent will becomeunworkable."

That message probably won't be lost on the otherbroadcasters that are negotiating retransmission-consent deals now. Those include The WaltDisney Co., which is trying to trade carriage of its new SoapNet channel forretransmission consent for ABC-owned TV stations; and Hearst-Argyle Television, which istrying to leverage retransmission consent for its ABC affiliates in exchange for operatorsextending their deals to carry Lifetime Television and to launch Lifetime Movie Network.Hearst and Disney own Lifetime and its LMN spinoff.

Cox and News Corp. said they mutually agreed not to revealdetails of their new retransmission-consent agreement, so it's not clear which sideblinked.

The two companies had clashed, with Fox pulling its signalsJan. 1, over Fox demands that Cox carry FXM: Movies from Fox and Fox Sports World on itsdigital service across the country, and not just in Cox markets where Fox owns TVstations.

While Cox has 6 million homes, Fox-owned stations are onlyin Cox clusters with 1.2 million homes.

No one is talking about how much digital carriage, if any,Cox will give FXM or Fox Sports World under the new retransmission-consent pact.

The settlement means that other Cox markets threatened byFox pulling its signals as of Feb. 1 -- Phoenix and Orange County, Calif. -- are now safefrom any problems.

But at press time last Friday, one Cox operation -- HamptonRoads, Va., with 410,000 subscribers -- was still without a Fox station. That pendingretransmission-consent dispute involves Fox affiliate WVBT, which is asking for a lowerchannel slot. Cox has refused to grant that request. WVBT pulled its signal Jan. 1.

The Fox blackout involving its owned-and-operated stationstook place at Cox systems in Fairfax, Va.; Cleveland; Dallas, Houston and Austin, Texas;and Jonesboro, Ark.

As for last week's resolution of that standoff, Coxspokeswoman Ellen East said, "We're thrilled and very relieved that this disputehas come to an end. Fox programming is back on the air in all affected markets."

Before Cox settled with Fox, it was negotiating with Foxaffiliates in Texas and Arkansas to carry signals into Cox markets where Fox had droppedits owned stations from cable, a source said.

For example, the Fox affiliate in Little Rock, Ark. --KLRT, which is owned by Clear Channel Communications Inc. -- had made such an arrangementwith Cox that would have run for four months, KLRT general manager Chuck Spohn said.

East maintained that the MSO had just "madeovertures" to out-of-market Fox affiliates, and it hadn't decided to go aheadand import their signals. "It's an option we've explored," she said."But there's no decision on going forward. There would be hurdles that wouldhave to be overcome, like setting up the microwave."

Cox's plan to import a distant Fox station to somemarkets would have been risky. According to the U.S. Copyright Office, under federalcopyright law, Fox's Washington, D.C., station, WTTG-TV, for example, would beentitled to force Cox to black out Fox network programming, such as game show Greed andcartoon comedy The Simpsons, and any syndicated programming for which WTTG haslocal rights.

KLRT's signal was to have been carried, after beingdelivered via microwave, to four Cox systems in the Jonesboro area, according to Spohn.

Tiny Jonesboro is the 178th-ranked DMA, and TVstations in neighboring Memphis, Tenn., and Little Rock are already being delivered to themarket via microwave, according to Spohn.

So his deal with Cox would have leveled the playing fieldwith his competition -- the other broadcasters. "It makes sense for us," hesaid. "My competition is already in Little Rock, and we will be piped in on that samemicrowave signal."

Even before the retransmission-consent battle broke outbetween Cox and Fox, Spohn said, he had negotiated rights to rebroadcast the Cotton Bowlcollege-football game, which aired on Fox New Year's Day, pitting the University ofArkansas against the University of Texas. KLRT was set to reair that game -- which localfavorite Arkansas won -- Jan. 7.

According to East, Cox's Jonesboro systems, by specialarrangement, planned to go ahead and air the Cotton Bowl rebroadcast, bringing inKLRT's signal Friday night. After that airing, Cox would restore the Fox-ownedMemphis TV station, she added.

Cox would have put the Fox-affiliate signals on the samechannel where the Fox-owned station had been, according to sources.

Last Thursday, after getting the letter from the foursenators, Robbins issued an open letter saying he agreed with them.

"We are deeply disturbed by the callous disregard forviewers exhibited by Fox, which has chosen to leverage valuable sports programming inexchange for unreasonable business demands that could drive up costs for Cox customersnationwide," Robbins wrote.

Bruce Leichtman, a media and entertainment analyst with TheYankee Group, said Fox took a hard line with Cox partly because of the leverage thebroadcaster thought it had with football, including various college bowl games during NewYear's Eve weekend and the National Football League's National FootballConference playoffs.

But Leichtman added that in these retransmission-consentbattles, "the broadcaster usually blinks first. When you lose 70 percent of youreyeballs, your business starts crumbling."

In retransmission-consent battles so far, at least twobroadcasters have already lost their bids to leverage retransmission consent to gaincarriage of a cable network they own or of a second channel.

CBS affiliate WBNS-TV and owner Dispatch Broadcast Groupagreed to a new deal with Time Warner Cable in Columbus, Ohio, even though the operatordidn't agree to carry Ohio News Network, which is also owned by Dispatch.

And in Corpus Christi, Texas, KIII-TV returned to theAT&T Broadband & Internet Services cable system last week after the station failedin a bid to immediately get a second channel.

The ABC affiliate pulled its signal from AT&T BroadbandNew Year's Eve after retransmission-consent talks bogged down. The station wanted asecond channel, on channel 8, which is where Discovery Channel is now. KIII was alsoasking the cable operator -- which has 80,000 subscribers in the market -- to run a largenumber of promotional spots for the broadcast station.

After being off the Corpus Christi cable system during theweekend, negotiations resumed last Tuesday. By 4 p.m., the TV station had regained itscable carriage, in time for the Cotton Bowl game.

AT&T Broadband said Discovery retained its channelslot, but there is apparently still a chance that KIII could get a second channel once thecable system expands its channel capacity.

Ted Hearn contributed to this story.