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Fox and Time Warner Settle, but…

January 4, 2010 | Author: Ibex Marketing

The much-publicized game of chicken between Fox and Time Warner ended on New Year’s Day with a settlement. The terms were not disclosed, but Time Warner agreed to pay Fox for the rights to retransmit the Fox Network programming and some other News Corp cable networks. As a result, Time Warner’s customers did not miss out on the Fox coverage of college and professional football over the New Year’s holiday weekend.

The fallout of this agreement has yet to make its complete impact felt, however. Certainly, it will likely cause a rise in Time Warner’s subscription fees, but there’s more. As cable bills continue to rise, consumers are going to start getting more vocal about not wanting to pay for the stations they don’t watch, and the pressure for a la carte pricing will increase. Cable companies don’t have to respond to such pressure, as they typically have a monopoloy on service in a given community, but satellites are free to do whatever they want. I won’t be surprised if the satellite services introduce a la carte first, which will then put enormous pressure on the cable companies.

But the dominos are already falling in other directions as well. Scripps Network pulled the Food Channel and HGTV from the 3.1 million Cablevision subscribers because the two companies have failed to negotiate a new rate for those channels. Scripps makes the strong argument that many cable networks with lower ratings command higher fees than Scripps gets.

The consumers are unhappy about television subscription fees, both cable and satellite. Advertisers are unhappy because their ads are being skipped wholesale by the viewers. The studios and content producers are unhappy because it’s getting harder and harder to make money on their programs. The cable, satellite, and local broadcasters are unhappy because they’re in the middle, getting squeezed.

When just about everyone in the value chain is unhappy, we’re faced with an unsustainable system. I don’t know where TV programming in this country is headed, but I do know that it will change.