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DirectTV & Fox in battle over content costs October 26, 2011

Posted by TelUS Consulting Services in Wireless catagory.

It shouldn’t be too surprising that DirectTV’s (NASDAQ: DTV) battle with News Corp.’s (Nasdaq: NWSA) Fox Networks is reaching a critical stage as the satellite provider’s subscribers soon could be left without access to a number of the company’ cable offerings, including include the FX Network, National Geographic Channel, SPEED, Fox Soccer Channel, Fox Movie Channel, Fox Deportes and Fuel TV.

DirecTV has been in pre-channel shaving mode for almost a year, warning that rising content costs would likely cause operators to make some tough dollars-and-cents decisions as carriage deals came up for renewal.

DirecTV subscribers also could lose access to Fox regional sports networks,which carry some college football and NHL games, although there’s no current risk that they’ll lose local or national Fox programming or Fox news.

The ongoing dispute over carriage fees is set to come to a head Nov. 1, the deadine for a deal that already has expired.

DirecTV CEO Mike White said News Corp. is seeking a nearly 40 percent bump in its fees for the programming; he said DirecTV would start pulling programming from its lineup by Nov. 1 if a deal isn’t reached this week.

News Corp.’s Fox Networks contends DirecTV hasn’t replied to its offer of an extension in contract talks.

“DirecTV sent us a proposal on Tuesday afternoon,” the company said. “They have given us no chance to respond before taking an unnecessarily aggressive posture and going public. It is disappointing that they have chosen bad faith tactics over meaningful negotiation.”

Fox Networks said it was willing to continue offering its programming for the same price and terms as they are currently carried in the interim.

This isn’t the first time Fox Networks has gone to the mat with a satellite TV provider. In 2010, Dish Network (NASDAQ: DISH) subscribers lost access to FX, National Geographic Channel and 19 Fox regional sports networks for about a month in October 2010.

During its earnings call last December, DirecTV said it was looking to trim its channel lineup to lower programming costs–and, thus subscription fees.

The company said it was looking to drop less-popular channels, opting to pass on renewing some carriage deals with channels that aren’t “necessary or worth their costs.”

At the time DirecTV told an audience at its investor’s day in New York that providers “don’t have a bottomless pool of money” for content and that less-viewed channels could be on the chopping block.

In our battle to manage our economics, DirectTV will look to repackage channels where we have over-distributed, or frankly just to remove certain channels from our platform if they are not relevant. Is there a place for channels that only serve a small fraction of their audience? Should they have to pay retrans fees and continue to carry channels which were once considered to be part of the equation when we didn’t pay retrans fees? As the marketplace changes, these questions become more important for their entire industry.

Costs for sports programming, in particular, have operators worried as they are growing at double-digit rates. That also is likely to lead to some budget trimming via channel shaving. I assume that the greed shown during recent NBA & NFL player negotiations is finally hitting the consumer.

DirectTV also touched on the sports-programming hurdle, saying their rising costs could mean that local, or regional sports channels would be dropped or offered à la carte by 2012.

Looks like 2012 is here.  Are those Fox Network properties gone for good? While I have to admin that I enjoy Fox programming, I also have to admit I am tired of every corporation in America having their hand in the consumer’s pocket. I guess 2012 will be a year of cost trimming, from the home to the biggest corporations.

Joe Buck, NCE

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