As the battle continues over carriage fees between Time Warner Cable Inc. and local broadcaster LIN TV Corp., the cable operator is gearing up for what analysts expect to be its next major squabble.Time Warner Cable is bracing for a similar showdown with Spanish-language broadcasting powerhouse Univision Communications Inc., and industry observers say that the outcome will set the pace for a slew of similar deals that will be negotiated in coming months.
[Univision] Associated Press
Univision is among a rising number of broadcasters choosing to negotiate fees with cable operators.
"Time Warner's battle with LIN TV is a dress rehearsal for the much more important negotiations coming up with Univision," said Craig Moffett, an analyst at Sanford C. Bernstein & Co.
Univision is among a growing number of broadcasters that are opting to negotiate with cable operators over a fee to distribute their channels, rather than requiring to be carried under the "must carry" Federal Communications Commission regulation, designed to ensure no broadcaster is shut out of distribution.
By negotiating a fee, broadcasters can secure extra revenue as ratings decline and competition intensifies -- something cable operators have been willing to do in the past for important channels.
"It is very hard to finance television distribution and production on an advertisement-only basis anymore," said John Hane, an attorney at Pillsbury, which counts LIN TV as a client.
Negotiating those fees has become a hard-fought battle, however. Last week, LIN TV pulled its channels from Time Warner Cable after they failed to reach a new agreement.
Univision told operators it would seek fees in June, ahead of an Oct. 1 deadline mandated by the FCC, according to a person familiar with the situation. Contracts tend to be negotiated every three years, and other broadcasters will also seek to tap cable operators for fees at the beginning of next year, say industry executives.
Time Warner Cable, for instance, will also be negotiating deals with General Electric's Co.'s NBC Universal and Fox Television Stations, which is owned by News Corp., publisher of The Wall Street Journal, analysts say.
"Every broadcaster is watching what happens to every other broadcaster," said Mr. Hane.
Due to its popularity with Hispanic audiences, and given Time Warner Cable's footprint in cities such as New York and Los Angeles -- which have large Hispanic populations -- some analysts say that Univision may have considerable leverage over Time Warner Cable.
Univision has said it should get a dollar per month for every subscriber. That compares with the 30 cents that LIN TV is demanding. Even if Univision manages to get half of what it is seeking, it would cost Time Warner Cable an additional $80 million in the year ahead, estimates Rich Greenfield, an analyst at Pali Capital.
Time Warner Cable spokesman Alex Dudley said that current contract provisions allow it to broadcast Univision's network programming through the entirety of next year. If Univision withdraws local broadcasts such as news -- which Time Warner Cable has not secured the rights to, and tend to be popular -- the operator is likely to substitute other programming from Univision in those time slots.
A spokesperson from Univision said the company does not comment on its contracts.
