UPDATES Agreement Reached: No Fox Blackout On Time Warner Cable

fox2 twcbattleJeez, my cable bill is more and more resembling the national debt. So anything that anyone can do to hold down what we have to pay has to be commended. But despite the war of words, commercials, and print ad campaigns waged for the past couple of weeks, Time Warner Cable and News Corp in the end reached an agreement That's good for them, not us. The settlement covered the Fox network and many Fox cable networks (including F/X and the Fox Regional sports networks) without a programming blackout. fox twc2The question now is who won? Though the terms are hush-hush, Pali Research analyst Rich Greenfield knows neither company got what they wanted. But I know that subscribers lost because programming is now more expensive than ever and the cable/satellite companies will pass the increased costs onto the consumer like they always do. And creatives lost because there's no fucking way that a cheap company like Fox is going to share this windfall with Hollywood talent. On the other hand, Disney can look forward to a raise when its retransmission fee negotiations come due at the end of 2010:

Fox was looking for a $1/sub/month and TWC was looking to pay dramatically less. While much will be written on this topic over the coming weeks, with both sides tied to confidentiality agreements and a vast number of moving pieces beyond simply what the broadcast network is getting paid per sub per month (lots of networks, VOD rights and iVOD rights), we suspect both sides compromised.

Our best guess is that Fox was willing to reduce its demands for cable network distribution and sub fee growth at F/X and the RSNs, in return for cash retrans for the FOX network that likely averages out to north of $0.50/sub/month over a 4-6 year term (with fees below $0.50 in 2010). In the end, we doubt NWSA was able to reach its $1.00/sub/month goal without going dark (and pulling its signals from TWC), however, the final year of its deal with TWC may approach $0.75/sub/month.

-- Programming costs will continue to be biased upwards for cable operators such as TWC (high-single digits) thru a combination of cable network renewals and first time broadcast retrans fees.

-- The onset of cash retrans fees will help broadcasts such as FOX, however, the underlying business model remains challenged.