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SBJ/July 15-21, 2013/Media
FS1 carriage talks sticky a month out
Published July 15, 2013, Page 1
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DirecTV, Dish Network and Time Warner Cable — representing more than 46 million subscribers — still are negotiating to carry FS1 on Aug. 17, which is when Fox will turn its motorsports channel, Speed, into a multisport network.
Though talks have been described as amicable for the most part, news that some big deals aren’t done runs counter to the widespread belief in the sports industry that FS1 will flip a switch next month and launch to 90 million homes. While neither Fox nor distributors would comment about the state of talks, ticklish carriage negotiations and a new FS1 rate fee are slowing the process.
As with other sports TV deals these days, one of the main snags is over price. Distributors currently pay around 23 cents per subscriber per month for Speed, according to SNL Kagan. Sources say FS1 is being offered at 80 cents per subscriber per month at first, with increases that would push the fee to the $1.50 range over the life of a multiyear carriage deal.
Originally, distribution executives believed they would be able to carry FS1 at the same lower rate they pay for Speed until their Speed contracts end, but sources say Fox has not made that offer to any distributor that hasn’t signed new carriage deals.
Also complicating matters is the presence of other Fox-owned networks in the talks. For example, Fox also is converting Fox Soccer Channel into an entertainment channel called FXX and has to convince distributors to approve that change, too. Other Fox sports channels are part of the discussions, as well.
Take Time Warner Cable, for example. The cable operator does not carry the Fox-owned regional sports network FS San Diego. Time Warner Cable’s deal with YES Network, in which Fox holds an equity stake, ends after this season. Time Warner Cable executives were in Los Angeles last week talking to Fox about all these deals, sources said.
One of the main issues Fox is facing concerns the atmosphere around the high cost of sports rights. Several distributors recently have become emboldened by keeping sports channels off their systems. DirecTV has not reached an agreement for several regional sports networks, like CSN Houston, CSN Portland, Longhorn Network and the Pac-12 Networks. Dish Network has not cut deals with several RSNs, including YES Network and TWC SportsNet.
|Since David Hill and Fox announced the coming of FS1, it has been seen as a competitor for ESPN.
If FS1 launches to less than full distribution, some of the wind could be taken out of its promotional sails at the outset.
One unanswered question is what will happen if a distributor fails to reach an agreement for FS1. Time Warner Cable, DirecTV and Dish Network have contracts that call for carriage of a Fox-produced motorsports channel. If Fox simply goes dark, it could be in violation of those deals, sources said.
It’s not clear what Fox will provide distributors that don’t cut FS1 deals but still have contracts to carry Speed. Distributors say they’ve been told that one option is that Fox will provide a watered-down motorsports channel that would run in place of Speed, possibly even keeping the Speed name. There’s precedence for such a move: When Fox switched Fox Reality Channel into NatGeo Wild last year, it provided a several-hour loop of reality programming for the distributors that did not sign deals for NatGeo Wild.
The increased distribution and affiliate fees are important to Fox. Its executives have said that they expect FS1 to be profitable in the next two or three years, something that can only be achieved once they work out the affiliate deals.
Fox is counting on the strength of FS1’s schedule, which includes 5,000 hours of live-event programming a year, and FS1’s TV Everywhere components to convince distributors to cut deals.
Fox’s president of distribution, Mike Hopkins, is leading the affiliate negotiations for the broadcaster.