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If you’ve watched any Fox prime time shows in the past few weeks, you were probably privy to (several) public service announcements about big-bad Time Warner being mean to Fox in the playground. The ads portray Time Warner as an evil company that’s trying to keep your favorite TV shows away from you, because they’re just not playing fair. The spat concerns one of the most exciting topics in television: Retransmission fees.

The short of it is that Fox, along with all the other major networks, have historically never charged cable companies for retransmission of their programming. (Charging for retransmission has always been the domain of cable networks like TNT.) But now with advertising revenue falling, Fox is demanding that Time Warner pay up $1 for every subscriber. Time Warner is calling shenanigans on that price, which is as high as cable networks like TNT, and is reportedly making a counter offer under fifty cents.

They’ve been negotiating for weeks now, and things are getting even more heated up now that we’re quickly approaching midnight December 31 deadline. If they can’t work something out, it means that Time Warner customers may see their Fox programming vanish right as they’re celebrating the New Year.

Except, not really. Neither company would want to make viewers suffer during the sports-heavy month of January, so there’s very little chance that Time Warner customers will see any service disruption. Instead, these negotiations amount to a game of chicken to see who will fold first.

It’s no surprise then that the back and forth is getting to be pretty hectic. On Wednesday morning, Time Warner agreed to FCC arbitration. They were spurred on by a letter sent on December 22 by Senator John Kerry, in which he urged the two companies to resolve their issue before the deadline to ensure uninterrupted programming access for customers. Fox replied in kind several hours later on Wednesday and subsequently declined arbitration.

In his declining letter to Sen. Kerry, News Corp. President Chase Carvey said the following:

We strongly believe this is an issue that needs to be settled at the bargaining table and that binding arbitration all too often looks to the past, not the future. When Congress enacted the 1992 Cable Act, it established a clear mechanism for programmers and distributors to reach market-based agreements on the basis of direct negotiations. We respectfully believe these discussions do not belong in the hands of a third party.

I’m sympathetic to Fox’s advertising revenue plight, something which is affecting all television networks, but it seems that they’re demanding too much when they were earning nothing from retransmission before. And you can be sure that other broadcast networks are eying this deal to see how much they can demand from cable companies in the future. Considering that many television viewers have access to free over-the-air network broadcasts, I think they’re kidding themselves if they’re expecting the same fees as cable networks.

With about 19 1/2 hours left to go until the deadline for negotiations at the time of this post, it’s going to be fascinating to see how all of this pans out.

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