Cable Blackout Hits 1.3 Million

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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.

“Cablevision needs to stop hiding behind a call for binding arbitration and negotiate in good faith,” Fox said in a statement on Friday. ”We will continue to negotiate and are committed to putting all our resources towards reaching a clean resolution.”

The ongoing blackout is actually the fifth time this year that consumers’ access to a particular channel has been blocked. In addition to the ABC blackout, Cablevision also lost the Food Network and HGTV from its premium channel lineup for about two weeks before negotiating a new contract.  

This month, News Corp also stopped broadcasting 19 local sports channels, FX and National Geographic to Dish subscribers after a similar contract dispute over rate increases.

According to Bloomberg, all together, these blackouts have affected 19 million pay TV subscribers, and have led to providers like AT&T, Cablevision and the Dish Network to lose access to content.

The prevalence of these disputes has caused lawmakers to intervene. Sen. John Kerry (D-Mass.), chairman of a subcommittee overseeing communications, technology and the Internet, told Bloomberg he plans to introduce legislation that would keep such disputes from taking channels off the air until the FCC is able to decide on the need for arbitration.

Other Congressmen, such as Rep. Albio Sires (D-N.J.) and Rep. Ed Markey (D-Mass.) have urged the FCC to forcibly intervene and end the News Corp-Cablevision conflict.

The ongoing dispute caused millions of New York sports fans to miss the Phillies-Giants MLB playoff game on Saturday and the Giants’ football game on Sunday. Should it continue, it could even cost sports fans the World Series, which begins Oct. 27.

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