For those who may have missed the news, DirecTV and Fox Cable Network are going to war.
Well, not war perhaps, but this is certainly the end of detente. According to John Ourand of the Sports Business Journal, "DirecTV has threatened to drop 26 Fox cable channels by Nov. 1 unless the two sides move closer in their carriage negotiations. Contracts with the channels – including all the RSNs, FX, Speed and Fox Soccer – expired at the end of September. The Fox broadcast channel is not affected; its carriage deal with DirecTV ends Dec. 31. Fox News also is unaffected; its carriage deal with DirecTV ends Jan. 31."
According to Ourand's report, DirecTV claims Fox wants a 40 percent increase in carriage fees. In a statement released to the media, " "We hope to resolve this situation before any action is taken, but we will do what's necessary to protect our customers from excessive and unwarranted fee increases. We already provide News Corp nearly a billion dollars a year for their channels, and we have no problem continuing to compensate them fairly." Fox's response can be read as well.
MMA fans who lived through the DirecTV-Versus blackout were immediately and appropriately alarmed by the developments. I spoke to Ourand this afternoon to get his estimation on what impact the now public dispute between the Fox properties and the satellite cable provider could have on the UFC. Given the depths to which the UFC-Fox deal permeates into the Fox cable family, understanding how this conflict could affect UFC content seemed pertinent.
In Ourand's view, that the dispute is now public is a sign things have gotten ugly. However, if he were a betting man, he'd bet MMA fans don't have much to worry about...yet.
Luke Thomas: Joining me right now to talk about what could be and actually is some interesting news about DirecTV threatening to drop FOX cable networks on November 1, staff writer for the Sports Business Journal and Sports Business Daily, John Ourand, how are you, sir?
John Ourand: I'm doing great how are you?
Luke Thomas: Doing good, I know you're getting killed with this World Cup news so we'll keep this kind of brief. Sort of state what the nature is of the dispute between FOX cable networks and DirecTV.
John Ourand: Well FOX cable networks are about 26 regional channels. It's 19 regional sports networks along with FX, FOX soccer, FUEL, Deportes, National Geographic and FOX movie channel. They have deals with DirecTV that ended in the end of September so they've been operating for the month of October without really a contract. I think they signed a month-to-month extension but essentially they don't have a long term contract. Well DirecTV has finally told them that if they don't come to DirecTV with a more affordable price than what they're trying to get, DirecTV says they're trying to get 40% higher fees from DirecTV then DirecTV is just going to drop all those channels on November 1st. FOX broadcast is not affected yet but that's sort of a looming storm down the road because FOX broadcast channel's deal on DirecTV ends on December 31st.
Part of the reason why DirecTV is doing what it's doing now is because if DirecTV goes month to month to month to month then all of a sudden you have the FOX broadcast channel with all these other channels and going into the NFL playoffs and some of the other highly rated programming on FOX, X-Factor and American Idol, all of a sudden, all of the leverage would go to FOX. Right now, DirecTV has a little bit of leverage. You know, there's no basketball on the RSNs, hockey doesn't get gigantic ratings so they feel like they have a little bit of leverage and they want to try and get the best deal they can before this big broadcast deal comes in.
Luke Thomas: Alright, so I'm certainly no expert in these sorts of disputes. I'm looking at the numbers. A 40 percent increase in carriage fees. For the uneducated perspective which is the one that I certainly bring to the table, 40 percent sounds like quite a bit. Is that a stretch or is 40 percent, how would you characterize how far apart they are?
John Ourand: Well they're far enough apart that they are now publically bickering at each other so they are pretty far apart. 40 percent sounds high. I know when another publication went to FOX and brought up the 40 percent number, they said that's ridiculous. It is high but it is, these types of carriage disputes happen all the time. It's somewhat rare, believe it or not, when they go public. When they go public, everybody goes crazy like I'm doing right now with this story but for your listeners who really are worried about seeing MMA on FX and MMA on FOX broadcasts, it almost certainly, if you get FX and FOX broadcasts and you're a DirecTV subscriber now, it might go dark for a week, maybe two weeks but these types of disputes always get resolved especially with companies as big as FOX because they don't want to lose all of FOX programming.
Luke Thomas: Yeah, that's what I'm curious about here. If we drop MMA, which obviously is my focus, but even if we drop that, the things you mentioned before like the NFL playoffs, some of the more marquee programming on FOX, American Idol, The Simpsons, whatever it is, not to mention all the stuff on FX, FOX Soccer, Deportes, DirecTV has a lot to lose here, do they not?
John Ourand: They have a lot to lose but if you're DirecTV, you're really trying to keep your programming costs in line. Everybody complains about their cable bill or their satellite bill and this is one of the reasons why your bill is going up so they're trying to keep those costs in line and they also, if it really gets down to it, if you miss FX, how many other entertainment cable options are there for you? The Turner networks, TNT, TBS, USA, you have a lot that you can go to. One of the reasons why this is an interesting gambit by DirecTV is, basketball's on strike so you can rid of the regional sports networks a little bit easier. People will miss the NHL for certain but you have that big programming cloud that's not hanging over you and the NFL playoffs are on the FOX broadcasts and that's still a couple of months away and they're trying to stay away from that to get this deal done. If that gets wrapped in, DirecTV, if they go forward, DirecTV has set themselves apart as being the place for sports fans so if you love sports, you don't subscribe to cable, you subscribe to DirecTV. So if they then have to turn around and say, "Thanks for taking us but we're not going to show you the NFL playoffs on FOX." They would risk alienating a lot of their subscribers.
Luke Thomas: Going back to the 40% in carriage fees, I don't know to what extent they are related, but it seems to me for example, today, with the World Cup news, Univision I believe lost Telemundo and the price is going up several hundred million. ESPN lost out to FOX and that's going up fivefold almost it looks like. The UFC got a great deal, I wouldn't say above market value but these fees, these sports properties seem to be going up. Is that related to why FOX is seeking an increase in carriage fees?
John Ourand: It's somewhat related. One of the reasons that you have FOX able to bid so much more on it than ESPN is that they have FOX soccer channel which right now is in 35 million homes. It's not in a lot of homes and it costs 15 cents. If all of the sudden they have World Cup programming on that network, you can expect that they're distribution will go to many more homes and they'll get a higher rate so this is worth a ton to FOX. You take a look at ESPN, all of their networks are in at least 70 million homes and the big ones are in 100 million. If they're gonna go and pick up the World Cup rights, there's not a ton of room for them to grow unless they start ESPN soccer which is not likely to happen.
Luke Thomas: MMA fans are sort of accustomed to this dispute and by that I mean, there was a dispute with the WEC which is a sister organization owned by the people who own the UFC. It went black because it was on Versus and Versus is on DirecTV. How long, what are the chances it could escalate that the over-the-air FOX, big FOX, that deadline is looming? How likely a scenario is that?
John Ourand: It is so hard to predict these but I'll try and this is nothing more than a guess. The Versus, when they had a problem with DirecTV, it was only Versus so they just kicked off one channel and that was it. This is so many more channels and you have the prospect of FOX broadcast coming in and then a month after FOX broadcast is up you have FOX News coming in and FOX News has passionate viewers that are ready to assemble if FOX news ever gets dropped off so I, just because there are so many more channels involved, if they go dark which is a big if, I can't imagine it being for an extended period of time. Versus was off what, for like nine months. It's almost inconceivable to me that these two would allow this to go nine months with the FOX channels being dark.
Luke Thomas: Alright, so just to wrap up for MMA fans, if you get FX, if you get FOX Soccer, Fuel, first of all, you'll be able to get the fights on November 12th over the big-air FOX but you, and you likely when the deal kicks in with January for the FOX-UFC deal, you should be, all things considered, history looking back, you should be okay. Is that right?
John Ourand: If I were a betting man, I would bet that you'd be fine. Just kinda take a deep breath and watch these two corporate behemoths go and paddle each other in the press.
Luke Thomas: Before we let you go, last question then. How do you expect this to unfold? There's a website coming out that FOX is gonna launch that you reported on today called KeepMyNets.com. Based on the way you're talking, it's supposed to be resolved sooner rather than later. What would be the telltale sign that things have gotten ugly? What would cause you to say, "Oh, look at this part, look at this, that tells me things are going in a negative direction?"
John Ourand: Well, the fact that it went public, they're going in a negative direction now. I wrote about two weeks ago that they were out of contract but no one would speak to me on the record because, you know, they're still negotiating so, the telltale sign is that it went public. The next telltale sign, frankly, is if they go dark, because you're gonna see the press departments in each of these corporate entities jockeying for position and each trying to make the best case that they can make to the public and you're gonna see attacks and don't be swayed by that. A lot of times you see them straight up until the time that they actually do the deal because they want to make sure that they get their message out there. Right now, it's not quite nuclear. They're fisticuffs, but once it goes dark, that's when things go really nuclear.
Luke Thomas: Alright, John Ourand, staff writer for the Sports Business Journal and Sports Business Daily, thank you so much for your time and we'll continue to monitor your coverage on this situation.
John Ourand: Hey thanks for having me on.