Fox News and Time Warner: the pending divorce

Reuters reports “The COO of Fox’s parent company reportedly confirmed to the Wall Street Journal (which Fox owns) that he sent a memo to employees explaining that Fox stations will likely be pulled from Time Warner Cable.”

Time Warner is stating that they are refusing to pay a 300% increase per subscriber to carry specific channels – and Fox is threatening to cut the ties and not broadcast to Time Warner.

This is a gutsy move for Rupert Murdoch.  In 1995, Murdoch’s Fox Network became the object of scrutiny from the FCC, when it was alleged that News Ltd.’s Australian base made Murdoch’s ownership of Fox illegal. However, the FCC ruled in Murdoch’s favor, stating that his ownership of Fox was in the best interests of the public.

In late 2003, Murdoch acquired a 34 per cent stake in Hughes Electronics, the operator of the largest American satellite TV system, DirecTV, from General Motors for $6 billion (USD).

Could this be a move that is meant to purposefully move Fox out of the Time Warner realm?  Time Warner Cable executives have balked at paying that much and have claimed that negotiations with broadcast companies like Sinclair Broadcast Group Inc and Local TV which carry local affiliate stations are in the 25 cents to 50 cents a subscriber range.

CBS Corp CEO Les Moonves, who has been a very vocal supporter of getting pay-TV providers to pay cash for the right to carry his broadcast network, has publicly said he expects his company to be paid around 50 cents a subscriber, and Fox asks for double the amount.

Time Warner Cable, the No. 2 U.S. cable operator, which serves some 14 million customers, has stated they are willing to loose the Fox channels – and states their clients are ready to give up the Fox network.   I tend to disagree – for the larger part of that campaign – Time Warner never told their clients which channels they may be loosing.

Important to note here – the Fox news channel and National Geographic Network, which are 1/2 owned are not part of these discussions.

As for me – I can live without American Idol – and there are plenty of alternatives already for NFL

Can Time Warner afford to loose the programming of American Idol and the NFL ?

Can Murdoch afford to loose the additional funds advertisers may be unwilling to pay based upon the smaller number of subscribers (14 million approx. )?  One thing is for sure – just like in any divorce the children (in this case the customers) are the ones that will pay…