AOL/TW Plays Tough with Fox Sports

MSO refuses to pay higher rates in Fla., Minn.; Fox cuts them off

The annual year-end friction between cable operators and programmers has left two Fox Sports networks dark in the homes of close to 2 million AOL Time Warner and Advance/Newhouse subscribers.

In Florida, Fox Sports' Sunshine Network cut its signal when Time Warner's 10-year affiliation deal expired at the start of the New Year. That cost the network 1.5 million to 1.8 million homes (depending on which side you ask).

In Minnesota, Fox Sports Net North went off in 150,000 to 180,000 Time Warner homes. Ironically, ESPNnews, one of the offspring of the network with the most maligned license fees, took the Fox Sports channel slot.

Fox Cable executive vice president Linsday Gardner said there was no last-minute flurry of negotiations and that he hadn't had any substantial conversations with Time Warner in two weeks.

"I sent everybody home early," Gardner said. "No sense waiting for the phone to ring. It didn't ring."

Fox Sports said it cut the feeds because, "We were unwilling and unable to sell the product short. This is really the most compelling local product they have."

The fight is all about license fees. Time Warner Cable has refused to pay what the company described as an "extreme" increase in the first year and a double-digit percentage escalator in later years. The company said it's been paying around 90 cents monthly per subscriber for Sunshine Net in Florida and $1.50 for Fox Sports North in Minnesota.

Company spokesman Mark Harrad wouldn't specify exactly what rate increases the networks were demanding, but one industry executive put it at 60 percent in Florida and 45 percent in Minnesota.

Gardner wouldn't detail the proposals he's made, but said the escalator wasn't as large as Time Warner contends.

The bulk of the Florida systems were actually taken over by Newhouse as part of the Dec. 31 breakup of the Time Warner Entertainment-Advance/Newhouse cable partnership.

Newhouse—best known as a magzine and book publisher—now has operating control but buys its programming through Time Warner Cable.

Advance/Newhouse CEO Bob Miron said he fully supports Time Warner's moves on his company's behalf, calling the proposed Sunshine increase "unconscionable."

Miron said, "They're doing all the negotiating. We're going along with them."

Time Warner Cable may be emboldened by Cablevision Systems in its fight with regional sports network called the Yankees Entertainment & Sports Network, which sought $2 per month per sub. Cablevision wouldn't pay and kept YES off its 3.4 million metro New York City systems but said it lost only 40,000 subscribers.

After years of being afraid of dropping expensive cable channels, cable operators suddenly believe they might survive the subscriber backlash.