It appears that a conflict is brewing between News Corp., which owns the various Fox networks, and Time Warner Cable. The spat appears to be center around an issue of billing, and the result may be countless thousands of Time Warner Cable customers unable to access News Corp. content if an agreement cannot be reached before the start of the 2010. This seems to be a terrible tragedy in many ways, and one would hope that all parties come to their collective senses as it seems that everyone seems to have a lot to lose in this situation. Before exploring the stated and rumored reasons behind the conflict, it might be instructive to take a look at what the various parties are sacrificing in order to keep this conflict brewing.
Consumers Lose
In this instance, consumers may not be active participants in the conflict with the exception of letters and phone calls. In short, consumers are more or less pawns in this conflict for all intents and purposes. This is the heart of the tragedy, as consumers stand to lose access to a handful of Fox networks, and some very highly rated programs. Fox does have a tendency to produce programming with a little extra ‘kick’ and thus it may not be surprising to find that some consumers will not miss Fox’s programs, but having fewer options due to a corporate spat seems like a loss for consumers on the whole.
Time Warner Cable Loses
Time Warner Cable is another loser in this conflict, and probably has been losing since the news of the conflict was first leaked to the press about a week before Christmas. Time Warner Cable has more than likely been inundated with letters and calls regarding Fox, and is probably unable to legally and ethically respond that they are doing anything other than attempting to reach an amicable solution. This means that Time Warner Cable has already lost a measurable amount of money simply by virtue of the news causing additional support and public relations needs, let alone their stock price. For the record, the price of Time Warner Cable’s stock (NYSE:TWC) has dropped from $43.50 on December 16th to $41.42 by December 23rd only to rebound to $42.43 at the end of trading on the 29th of December.
The bottom line is that Time Warner Cable is anything but a winner in this contest of wills if they lose News Corp. programming. This is especially true considering the incredible competition and the fact that few markets are not being divided between multiple carriers now. Where once many smaller towns or neighborhoods were serviced by a single cable company, telecoms breaking into the digital cable industry have essentially ended the vast majority of such exclusive arrangements. This leaves Time Warner Cable in a very vulnerable position, effective beset on all sides.
News Corp. Loses
Strangely enough, News Corp. also stands to lose viewers that stick with Time Warner Cable. This number may be substantial due to contractual issues, but it appears that News Corp. is willing to gamble in this regard. At best, it seems likely that the media giant will lose a portion of its revenue in a bid to garner more revenue, but they may also lose the ability to influence. It is no secret that various news agencies have their own political leanings, and Fox News is no exception to this rule. Whether consumers who stick with Time Warner Cable will be able to find a news channel with a similar view of the world or another acceptable media source is unknown, but anything is possible given News Corp.’s diversity
The Problem
The point of contention between Time Warner Cable and News Corp. seems to be purely financial. News Corp. reportedly wants approximately $1 per channel per customer, which is comparable to what cable-only channels receive from cable companies. This may or may not be practical depending on which line of logic one tends to follow.
The first line of logic suggests that there is a fundamental re-balancing of relationships due to increased competition within the marketplace. Consumers now have more choices than they did in the past, largely due to telecoms joining the digital television fray, and digital download services such as iTunes. These options create more demand for television programming from the perspective of companies such as News Corp., but simultaneously lower the margins for individual carriers.
On the other hand, a re-balancing of fair prices that results in a package costing more tomorrow than it does today or did yesterday is unlikely to be successful. Offering less in the way of channels or services is also unlikely to be a viable long-term solution. The fact is that competition amongst digital television carriers is nothing short of fierce, and there is a very realistic chance that Time Warner Cable simply cannot afford to pay News Corp. what it is asking without increasing monthly prices. Monthly prices may be contractual in many cases, and thus fixed for some time. In short, Time Warner Cable certainly seems to be in a quandary, and its rivals are likely to be the primary beneficiaries unless News Corp. and/or other media asset owners and producers turn on them in a similar fashion.
Possible Solutions
There may be no excellent short-term solutions for this particular problem. It would seem to be in everyone’s benefit for Time Warner Cable and News Corp. to come to some sort of temporary agreement that keeps things as they are until a better solution can be discovered. If that solution involves removing FOX programming from basic cable and adding those channels to packages and/or making new FOX-centric packages, then News Corp. should certainly understand that such a transition is likely to cost time and money. Furthermore, it would seem unfair of News Corp. to single Time Warner Cable out with such a pricing format unless it is willing to force other digital television service providers to agree to a similar arrangement. If all basic cable channels follow suit, will basic cable be nothing but a memory?
