Cable Blackout Hits 1.3 Million

News Corp (Stock Quote: NWS) and Cablevision (Stock Quote: CVC) are still embroiled in a contract dispute, which reached a standoff on October 15,  that is costing 1.3 million cable subscribers in New York and New Jersey access to the media company’s basic cable Fox Broadcasting channel.

News Corp blacked out the channel at midnight on Saturday after it failed to resolve the dispute over the cable provider’s annual fees. Negotiations between the two companies resumed Monday, but as of press time, Cablevision subscribers still do not have access to Fox.

The dispute has angered many consumers who don’t understand how they can lose access to what is essentially a free cable channel.  (Those with an antenna, after all, can watch for free.)

The explanation is as follows: Cablevision pays News Corp a portion of the profits it makes off of its premium cable packages, which include Fox News, FX and other News Corp-owned local sports channels. It does not, however, pay a portion of profits from its basic cable package, which includes Fox, despite the fact that subscribers pay a monthly $18 fee for basic service.

News Corp wanted its existing contract with Cablevision to be adjusted to account for this transmission fee, an expected move since Cablevision already renegotiated similar contracts with ABC, NBC and CBS.  

The ABC Disney dispute, incidentally, marked the first time that a basic cable channel was blacked out to consumers, when ABC 7 was pulled off the air for almost a full day in March, causing movie lovers to miss the opening of the Oscars. Cablevision, however, is reluctant to renegotiate with News Corp, saying the company has demanded $150 million in annual fees, more than double its previous agreement and more than all fees negotiated with ABC, NBC and CBS combined.

Fox has declined to comment on that figure. Putting more distance between the two companies is the fact that News Corp has refused to enter arbitration suggested by the Federal Communications Commission, maintaining that the best way to resolve the dispute was through direct business-to-business negotiation.