DirecTV Threatens to Pull Fox Channels

By Alex Sherman - Oct 22, 2011 3:14 AM GMT+0700

DirecTV (DTV), the largest U.S. satellite- TV provider, is threatening to pull more than 25 channels owned by News Corp.’s Fox Networks to “mitigate the madness” of programming price increases by content providers, a company executive said.

Fox is asking DirecTV to pay 40 percent more for channels including FX, National Geographic and several regional sports networks, according to DirecTV Executive Vice President Derek Chang. DirecTV will remove the channels from its package offerings by Nov. 1 if Fox doesn’t lower its asking price, Chang said in an interview today.

DirecTV is the latest company to spar with content providers about programming price increases. Cablevision Systems Corp. (CVC) and Verizon Communications Inc.’s FiOS pulled the Tennis Channel last month after the network asked for “significantly higher” fees. In October 2010, Cablevision paid Fox what it called “an unfair price” for World Series games after a two- week blackout.

“We continue to talk to Fox and we’re not opposed to paying reasonable increases, but 40 percent is certainly out there,” Chang said. “These are challenging economic times. We’re trying to protect our customers.”

Chang said the El Segundo, California-based company “applauds” other pay-TV operators that have taken similar public stands against content providers.

‘Bad Faith Tactics’

Fox released a statement last night citing DirecTV’s use of “bad faith tactics” in going public with threats to remove the stations. Chang said a statement posted last night on a DirecTV website about the fee increase was intended to alert customers that the channels may disappear.

“The stakes are high since DirecTV has about 19 million subscriber homes, a little under 20 percent of News Corp. (NWSA)’s market that it would lose audience and advertising dollars for,” said David Joyce, an analyst at Miller Tabak & Co. in New York.

Fox said it has proposed keeping its stations on DirecTV as negotiations continue. Chang says talks are ongoing.

“Our hope is to continue to negotiate with Fox to come to a deal to keep these channels up. That’s the best thing for all our customers. That being said, the gap is significant and if we can’t close it, we have to deal with reality,” Chang said.

News Corp.’s chief operating officer, Chase Carey, was DirecTV’s chief executive officer from 2004 to 2009.

DirecTV rose 1 percent to $46.42 at the close in New York. The shares have risen 16 percent this year. New York-based News Corp. rose 2.1 percent to $17.20 and has gained 18 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net