The Work

October 18, 2010 5:30 PM

The Legal Strategy Behind the Fox-Cablevision Dispute

Posted by Victor Li

For angry New York sports fans who weren't able to watch the much anticipated Tim/Lincecum/Roy Halladay duel in Game 1 of the National League Championship Series or the Giants beat the Detroit Lions over the weekend, the good news is that Fox and Cablevision are back at the negotiating table to try and settle their dispute over retransmission fees.

But don't get your hopes up that this long-running dispute will come to an end in time for "House" Monday night.

According to a statement yesterday from Scott Grogin, a Fox representative, "no material progress was made” in the most recent round of negotiations and the two sides "continue to remain far apart." The Wall Street Journal reports that Cablevision declared an impasse after balking at Fox's demand for $150 million a year for programming on Fox and MyNetwork affiliates in Philadelphia and New York, as well as Fox Business News, Nat Geo Wild and Fox Deportes -- a significant increase from the current price tag of $70 million (Fox News and FX are not affected). A spokesperson for Fox tells us that the network is not using outside counsel in this matter.

Cablevision, for its part, accused Fox of negotiating in bad faith. “The longer this shameful News Corp. blackout of the NFL and Major League Baseball continues, the more obvious it becomes to everyone, including political leaders of both parties, that binding arbitration is the fastest and fairest way” to end the stalemate, Cablevision Executive Vice President Charles Schueler said in a statement yesterday. According to the New York Times, networks are rarely off the air due to retransmission disputes for more than one day, which makes this fight, which is into its third day, one of the longest impasses ever -- surpassing recent stalemates between ABC and Cablevision, and Time Warner Cable and Fox.

Cablevision also offered to submit to binding arbitration in hopes of hammering out an agreement, but was rebuffed by Fox. Attorneys familiar with cable retransmission issues tell us that Fox would have been out of its mind to accept arbitration. "Arbitration is usually a compromise," says Scott Flick, a Washington D.C.-based partner at Pillsbury Winthrop Shaw Pittman who is not involved in this dispute. "Anytime you have a seller, that party will be less willing to go into arbitration because they set the price and it's the other party that doesn't want to pay. Imagine if you went into a car dealership and you offered to go into arbitration rather than pay the price the dealer was looking for. The only thing that will come out of arbitration is a figure that's less than what they're willing to sell for."

Additionally, Fox's highly rated shows give them leverage that other networks lack. "In this particular situation, Fox has very valuable programming that a lot of cable subscribers want," says Flick. "For many years, cable had been unwilling to pay a premium for broadcast programming because they had a monopoly until satellite [TV] arrived. Now, the broadcasters want to catch up and make up for lost time."

Ultimately, Flick sees this matter getting resolved quickly, but cautions that both sides could end up losing out. Fox might have to refund some advertising money due to the blackout while cable companies might lose out on subscribers.

In the meantime, we'll have to make due with 88 other channels.

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