King Content, Queen Cable perilously stir subjects

October 26, 2010

Television royalty is in another one of its unsavory tiffs. One king of content, Rupert Murdoch, is squaring off with a member of the distribution ruling class, Cablevision, led by James Dolan.

The cable operator serving 3.1 million subscribers in the New York area has blocked access to News Corp’s Fox programming as the two companies tussle over retransmission fees. Such fights aren’t uncommon but the stakes are becoming higher because so much programming can be found online. Each new spat gives customers a reason to pull the plug, which would hurt both sides.

At stake in this particular dispute appears to be $80 million at most in annual fees. Cablevision says Fox wants to charge it a little more than twice the $70 million it pays now to carry stations that broadcast pretty popular stuff, like NFL Football, Glee and American Idol. Given Cablevision pays $140 million a year for the MSG sports channels the Dolan family also controls, the valuation hardly seems unreasonable. But as the one who bills consumers, Cablevision is understandably tiring of being cast as the bad guy.

Murdoch seemed to have an ideal negotiating position this time. Fox carries the baseball World Series, and with the New York Yankees and nearby Philadelphia Phillies apparently coasting to a rematch of last year’s major-media-market match-up he figured he had the Dolans over a barrel. Both teams lost unexpectedly over the weekend to far-flung rivals in Texas and California. It might still be un-American not to broadcast baseball’s championship but advertisers and East Coast fans will be harder to come by.

That makes it less likely Cablevision subscribers will defect even as they rolled into a second week without access to Fox channels, and the companies took the fight to regulators. But that doesn’t mean Dolan, who has gone toe to toe before with other broadcasters, is off the hook, or that Murdoch still isn’t overplaying his hand.

Not only can viewers get Fox with a simple high-definition antenna, but online sites like Hulu and Netflix have grown rapidly in popularity. Apple and Google have rival services. Fox even shows programs on Fox.com while Major League Baseball has a cheap, live streaming service. It’s still a big leap for consumers to shut off their cable service. But it wasn’t long ago that yanking out a telephone landline seemed unthinkable. The content and distribution oligarchs need to rule a little more compassionately lest they find their business models overthrown before long.

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