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Fox Net, Affils Settle NFL Tab

Oct 20, 2003  •  Post A Comment

After months of tense negotiations, Fox Broadcasting has hammered out a new National Football League cost-sharing agreement with its affiliated stations that for the first time, gives the network the flexibility to repurpose up to four prime-time programs each season on cable. In return, the affiliates have gained three additional spots in NASCAR programming.
The new agreement, to be announced shortly, will expire in 2006, when the NFL’s TV rights deals expire.
“It shows this partnership can work to adapt to a changing industry,” said Robert Quicksilver, executive VP of distribution and affiliate relations for Fox Broadcasting.
The new deal does not increase the reverse compensation paid by the affiliates to the network-which is said to total from $1 million to $1.2 million per month for the network, which last year took a write-down of nearly $400 million on its eight-year $4 billion NFL deal. Nor do the affiliates gain additional inventory in NFL programming.
The affiliates do not get any additional prime-time spots in network runs of any programming that might be repurposed. Fox Broadcasting did not have the right to repurpose its programming under the NFL agreement that expired at the end of July. Nonetheless, it repeated episodes of “24” on Fox cable channel FX in an attempt to expand the audience for the highly acclaimed drama during its second season.
To quiet the howls from affiliates, the network agreed to grant the local stations an eighth spot in every network run of “24,” which is not expected to get an additional airdate on FX this season. There was some disappointment at the affiliate level that last year’s relationship Band-Aid, the additional spot on “24,” did not prove to be a business precedent. The subject of repurposing continues to be a touchy one for affiliates, who generally regard anything that takes away exclusivity as having the potential to devalue the programming they air and blur the value and image of the Fox network.
“How do they explain NBC, which is now repurposing seven hours or some crazy number, I think, and is still No. 1 for the most part? And most of the shows they are repurposing are doing well on the network, so that argument just doesn’t hold water any more,” said Tony Vinciquerra, president and CEO of the Fox Networks Group.
While repurposing deals generally have not produced the revenue the networks once envisioned, Mr. Vinciquerra argued that Fox Broadcasting was at a disadvantage when negotiating for new programming because it lacked the contractual freedom to offer repurposing rights to programming suppliers.
“We’re looking forward to being able to compete with other networks in finding the best product for the Fox network now that we have the ability to negotiate on the same playing field as our competitors,” Mr. Vinciquerra said.
Under the new deal, the shows Fox repurposes cannot be all scripted series or all reality series but rather would have to be a mix of scripted and reality content.
It has not been an easy negotiation. In early August Fox ended efforts to forge an agreement with the affiliates advisory board, which it would have then recommend to the affiliate body. The network instead focused on negotiations with the stations and their owners. One of the subjects that surfaced during talks between the network and the advisory board was a concern that Fox programming will migrate to DirecTV after Fox owner News Corp. concludes its deal to acquire the satellite TV service.
The new NFL agreement does not address the subject.
“I can certainly understand their concern,” said Mr. Vinciquerra, “but to think that we would do something to take [content from] a 100 percent distribution system and limit it to a 12 percent distribution system doesn’t make much sense, A., and B., we own 100 percent of our [Fox-operated] stations and potentially will own 34 percent of DirecTV, so those two driving economic facts, I think, are pretty critical.”