Fox Network's top executive said on Tuesday that asking Time Warner Cable to pay $1 per subscriber for the right to carry the Fox Broadcast network is reasonable and suggested that other networks like CBS Corp. would ask for similar fees in the future.
Tony Vinciquerra, chief executive of News Corp.'s Fox Networks Group, said the future of the broadcast TV business depends on getting fair value for the investments it makes in high-end entertainment and sports programs like "American Idol" and NFL football games.
Fox is in 11th-hour talks with Time Warner Cable Inc., the second largest U.S. cable operator, to negotiate a monthly subscriber fee for the right to carry the free-to-air broadcast network.
"If we end up at $1, I think that's a reasonable step on getting to the right value for a broadcast network," said Vinciquerra in an interview with Reuters.
Time Warner Cable has previously described Fox's demands as "unreasonable" and company insiders privately point to agreements with smaller affiliate broadcast companies that have signed carriage deals for around 20 to 25 cents as a good starting point.
CBS Corp. CEO Les Moonves, who runs the overall top-rated broadcast network CBS, has also been vocal about demanding that cable and satellite companies pay cash for so-called retransmission rights. But he has publicly talked about negotiating around 50 cents from cable providers.
Vinciquerra would not comment on CBS's past negotiations, but he said: "I'm sure if you asked Les does he think 50 cents is the right number now he would say 'no.' I think in the future he will ask for more."
The TV industry veteran said after months of "positioning and posturing" both sides are now getting into "heavy duty negotiations."
The current contract between the two sides ends on midnight Thursday. If an agreement is not reached by then Fox could go off the air in major Time Warner Cable markets like New York City, Los Angeles, Dallas and Orlando.
Time Warner Cable is also negotiating on behalf of privately held Bright House Networks and the total number of households affected could top 13 million, according to Fox.
Vinciquerra said it is very likely that the negotiations would go right down to the wire.
"The only way you walk away from the table getting as much as you can is by facing it down at the last moment," he said.
Both sides have launched aggressive PR and marketing campaigns claiming the other party is making unreasonable demands.
Time Warner Cable has claimed some programing partners are demanding 300 percent increases and that it would be forced to pass on the cost increases to its subscribers.
Fox for its part claims Time Warner Cable would increase customers' bills regardless of whether programmers raise their fees.
Broadcast networks like Fox and CBS have traditionally relied solely on advertising for revenue.
Now they want to mimic the business model of cable networks like FX and Time Warner Inc's CNN, which earn money from advertising as well as subscriber fees paid by the cable/satellite providers.
The problem has been that the big four networks, including Walt Disney Co.'s ABC and General Electric's NBC, have always been free to air and have lost the advantage of their national scale as advertising dollars have started to shift significantly to cable networks.
"The fragmentation of the viewing is obvious so over time the advertising side of this probably will erode so we need to find the cash subscriber support for these businesses," said Vinciquerra.
"The real challenge for us is the cost for sports product and competing for the right entertainment product to put on your network," he said.
He gave as an example the fact that Fox lost out to sports cable network ESPN for the rights to carry the college football Bowl Championship Series. "They outbid us by $100 million when the offer we made would only have taken us to break-even."
Vinciquerra and other broadcast executives complain that the broadcast TV business is the only sector of the media industry in which the revenue earned does not correspond to its huge usage by consumers.
"That's got to be fixed," he said.
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