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Cablevision-Disney dispute a sign of the TV times

Singer/actress Miley Cyrus arrives at the 82nd Annual

Singer/actress Miley Cyrus arrives at the 82nd Annual Academy Awards held at Kodak Theatre on March 7, 2010 in Hollywood, California. Credit: Getty Images

The standoff with Disney that nearly scrapped the Oscars for 3.1 million New York cable subscribers is now history, and Cablevision has the future to look forward to -- Fox.

Industry sources say Cablevision's next big retransmission fee negotiation will be in October, when the current contract with News Corp. ends. News Corp. is believed to be seeking new fees for all of its properties, including WNYW/5.

A recent standoff between Time Warner and News Corp. nearly led to a blackout of New Year's Day bowl games before a last-minute deal was reached.

Industry observers say such retransmission fights could become the norm rather than the exception as cable networks and other TV providers seek to control costs with broadcast signals and as major media companies seek to boost even further the payments they get for those signals.

"There will be more standoffs,"says Robin Flynn, senior analyst with Charlottesville, Va.-based SNL Kagan, a financial services firm that follows various industries, including cable.

For that reason, a consortium of cable companies, including Time Warner and Cablevision, and satellite broadcasters, including DirecTV and Dish Network, petitioned the Federal Communications Commission Wednesday to arbitrate fee disputes as they arise.

"The FCC should take action to protect consumers' interests and reform a system that is clearly broken," according to a statement from Cablevision, which owns Newsday. An FCC spokeswoman declined to comment on the proposal.

Last week's clash was over so-called retransmission fees, or what cable operators pay program suppliers for use of their programs.

Beginning in 1993, media companies such as NBC that owned both broadcast stations and cable networks (such as CNBC) sought fees for their broadcast signals. But cable operators instead agreed to carry whatever new cable networks the broadcasters created - rather than pay for the broadcast signal.

The deal was good for major program suppliers like Disney, which bought Capital Cities/ABC in 1996, because they could launch networks. And cable operators avoided shelling out real money for the TV signals.

That has all changed. Companies like Disney and News Corp. now want money for their TV signals, too.

"As the broadcast networks are less able to get advertising revenue, they're turning to the cable guys to make up for that shortfall," Todd Mitchell, an analyst with Kaufman Brothers Lp in Manhattan, told Bloomberg News recently. "For the cable guys, these programming costs are vastly outstripping their subscription pricing, so we're getting to the point of showdowns."

That's why push has now come to shove. Cable operators don't want to absorb too many new fees because if their costs go up too fast, that could force customers into the arms of broadband or satellite competitors, which are facing retransmission fee negotiations of their own.

"Not only are broadcasters [like Disney] asking for higher rates but so are cable networks [like Scripps-owned HGTV and the Food Network]," Flynn said. "I don't think [operators] will be able to pass along all of that, but a significant degree will be passed on."

Observers say it's impossible to predict the outcome of the next fight. Time Warner and ABC face off in August. And like ABC with the Oscars, Fox has a major event on the horizon as it negotiates its new deal with Cablevision later this year: Super Bowl XLV in February 2010.

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