Carey: Fox likely to go off the air on TWC

Net poised to go dark in 13 million homes starting Dec. 31

Fox will likely go dark in some 5.5 million Time Warner Cable homes at midnight Dec. 31, according to a memo to News Corp. employees sent Wednesday by the company's president, Chase Carey, who has been leading the negotiations with TWC on behalf of Fox and several entertainment and sports cable channels, including FX, Speed and Fox Soccer.

Also on Wednesday, Fox got an indirect vote of support in its battle with TWC from its Hulu partner ABC, which indicated it could be next to enter the fray.

"At this time, it looks like we will not reach an agreement and our channels may very well go off the air in Time Warner Cable systems at midnight tomorrow, Dec. 31," Carey wrote in the memo. "We deeply regret that millions of Fox customers will be deprived of our programming, but we need to receive fair compensation from Time Warner Cable to go forward with them."

In total, almost 15 million TWC homes which subscribe to News. Corp.'s cable channels in discussion, will lose signal Thursday night.  

The memo was sent out hours after TWC chairman and CEO Glenn Britt sent a letter to Sen. John Kerry, copying Carey, in which he agreed to submit the dispute to binding arbitration before the FCC and proposed an interim agreement with Fox that would keep the network's signal on if a deal is not reached by the Dec. 31 deadline.

In his memo, Carey addressed the extension proposal.

"Some may ask why Fox isn't providing an extension while negotiations continue," he wrote. "The fact is that we've been trying since the summer to negotiate a fair deal and that further extensions simply extend the period of time that Time Warner profits from our marquee programming without fairly compensating Fox for it."

In response, a TWC spokeswoman said that "negotiations are ongoing, but Fox's current demands are still excessive. We continue to hope Fox won't punish our customers by taking their programming away."

Carey encourages Fox viewrs in the affected markets  to switch to a satellite or a telephone provider.

"I can assure you that we have worked very hard over the past few months to prevent this event," he wrote. "While we are continuing to engage with Time Warner Cable to try to resolve the issues, we will not do a deal that does not value our programming fairly."

Carey once again took aim at TWC's claim that Fox's demand, said to be for $1 per subscriber per week, was unreasonable, reiterating its arguments that "our requested compensation is about equal to what Time Warner Cable pays TNT, a network with a fraction of the ratings and original programming of Fox, or about a quarter of what they pay ESPN, a network we again dwarf in ratings." He pointed to TWC's "40% profit margin," arguing that Fox's content has been a "driving force" in their profit growth yet not being compensated and that TWC's big profit margin would allow the company to pay the network without raising rates.

Carey also touched on the future of the broadcast networks, which have been looking to retransmission consent fees as a way to survive amid falling ratings ad rates.

"Our broadcast business cannot continue to build on the success you have achieved as an ad-supported-only network," he wrote.

Meanwhile, Disney -- whose ESPN commands the highest fee from cable providers, $4 -- chimed in in the spat with a statement by a spokesman.

"The hit programming on the ABC TV Network in tandem with the pre-eminent local news and community affairs efforts of our ten local ABC stations has tremendous value and is worthy of fair compensation," the statement read. "Overall, cable operators pay only about 25 dollars a month for all of the programming on the basic and expanded basic tiers, and they sell this to consumers for some 60 to 70 dollars. Considering these numbers and the fact that operators use these video offerings to up sell even higher margin broadband and phone services, blaming programmers for cable price increases is just plain wrong."
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