Fox Backs Down From FS1 Asking Price In Order To Get Deals With All Major Carriers
The frenzied rush that saw several of the country’s biggest distributors agree to carry FS1 at launch occurred only after Fox surprisingly backed off its asking price of $0.80 per subscriber per month, according to multiple high-level sources. Cablevision, Cox, DirecTV, Dish Network and Time Warner Cable agreed to carry the new, heavily promoted all-sports channel, but only at the same rate they were paying for the previous channel, Speed, which was $0.23 per subscriber per month. Fox told the distributors that it would convert Speed into FS1 and allow distributors with existing Speed deals to carry it at Speed’s rate, or at least close to it, according to multiple sources with direct knowledge of the talks. None of the distributors would comment beyond official statements. Importantly, none of the statements from these distributors referenced any new “deals” for FS1 signifying a change of contract. For example, Cox spokesman Todd Smith e-mailed: “On August 17, Speed will automatically convert to the new national 24/7 channel, Fox Sports 1, and Fox is rebranding Fuel Network to Fox Sports 2.” A statement from TWC simply read, “Time Warner Cable will carry FS1 when it launches on August 17.” All these statements came as Fox put out a statement that declared its new network would launch “with every major distributor on board.” Fox declined to comment any further.
COULD CAUSE RIPPLES IN SPORTS MEDIA: The move by Fox could cause major ripples in sports media, as the company chose to give on pricing instead of waging high-profile carriage battles with many of the top distributors at the same time. This marks a sharp change in strategy for the programmer, which had been seeking around $0.80 per subscriber per month for the new channel. Because that rate is more than three times higher than Speed’s, distributors strongly balked. Already frustrated by the high cost of sports rights, distributors forcefully resisted tearing up existing deals to pay more for FS1. In fact, just a week before its launch on Saturday, FS1 lacked significant distribution, which posed a major problem for the programmer. Rather than having these carriage fights with multiple distributors at launch, Fox execs, led by Fox Networks Distribution President Mike Hopkins, decided to establish the channel on cable and satellite systems first. Then, as Speed’s affiliate deals expire, Fox will try to negotiate increases. While those negotiations will occur in an environment where distributors have become more emboldened in their disputes with sports networks, Fox is banking that systems find that it is more disruptive to drop existing channels that have a built-in audience.
DEALS ARE STAGGERED: Fox’ deals with TWC, DirecTV, Dish Network, Cox and Cablevision are staggered over the next couple of years. Some of those deals could be worked out before the Speed deals expire. TWC’s contract with YES Network ends after this season, and it is likely that Fox will try to tie a new FS1 deal in with any YES deal. Similarly, Cox has contracts with several Fox RSNs ending soon. Those negotiations could lead to a new FS1 deal with Cox. A major distributor not involved with the deadline pressure was Comcast, which signed a deal with Fox earlier this year that included FS1, but it is believed to contain “most favored nation” provisions that guarantee the distributor pays the lowest rate available. In addition, because Charter’s deal with Fox on Speed was expiring later this year, it was able to work out a new deal, sources said. But sources did not know the rate that Charter agreed to pay for FS1.
NECESSARY MOVE FOR FOX: The move was vital for Fox, as the flurry of activity just days before FS1 goes live allows it to launch Saturday to around 90 million homes. That number is important for FS1, as its contracts with some college conferences, like the Big Ten, and leagues, like MLB, stipulate the channel has to reach a certain number of subscribers to carry its programming, sources said. In recent months, as Fox was seeking new deals for FS1, it told distributors they would be provided with a watered-down version of Speed if they did not agree to a new FS1 deal. Just a couple of weeks ago, Fox gave a programming lineup for such a channel to the Tribune listings service. The schedule was filled with reruns and infomercials. It is not known if that channel still will be available. The distributors had to give the OK for Fox to switch Speed over to FS1. Because Fox was changing the channel’s content from a motorsports channel to an all-sports channel -- thereby changing their contracts -- the distributors had the right to drop it. On the other hand, Fox was able to rebrand Fuel into FS2 without needing distributors’ agreements, sources said. That is because the channel’s affiliate contracts allow for the type of content that will be on FS2.