Allowing cable and satellite TV subscribers to watch TV series from Fox and other cable networks through TV Everywhere websites and mobile devices will help pay-TV customers see value in the ballooning costs of subscription video programming packages, News Corp. (Nasdaq: NWSA) Deputy Chairman and COO Chase Carey suggested Wednesday.
With programmers such as News Corp.'s Fox Networks demanding increased license fees from multichannel providers, distributors have been pressured to raise prices on bundles of expanded basic cable networks.
Comcast (Nasdaq: CMCSA), Time Warner Cable (NYSE: TWC) and Cox Communications are also experimenting with offering subscribers smaller--and less expensive--packages that don't include ESPN and regional sports networks.
Asked on News Corp.'s third-quarter 2012 earnings call about how the company can continue to increase fees for its cable networks while preserving large bundles of cable networks, Carey said TV Everywhere distribution is vital.
"The customers [would] always rather pay less ... I think one of our challenges it to make sure we continue to make that experience better by enriching this," Carey said.
News Corp. generated $846 million in operating income from cable network programming during the quarter, thanks in part to a 16 percent jump in fees from affiliates that carry U.S. networks such as Fox News Channel, FX, National Geographic Channel and its regional sports networks.
Carey said programmers and distributors can sustain their traditional distribution model--which is focused on selling expanded basic cable programming packages that contain dozens of networks--by letting subscribers that pay for those networks access content on multiple platforms and devices.
"This is a good business model for both [programmers and distributors]," said Carey, a former CEO of DirecTV (Nasdaq: DTV). "I do think TV Everywhere is the primary initiative through which we would try and address it by again adding value to it as the cost goes up," he added.
News Corp. has been one of the most aggressive distributors when it comes to multiplatform programming distribution, and finding ways to only offer online video to paying cable and satellite TV subscribers. Last summer, News Corp. pulled all full length episodes of TV series from Fox.com, limiting access to subscribers of multichannel providers that strike TV Everywhere distribution deals with Fox.
The company has reached TVE distribution deals with DirecTV, Dish Networks (Nasdaq: DISH), Mediacom Communications and Verizon (NYSE: VZ). The media giant is also tying retransmission-consent terms for its Fox-owned-and operated TV stations in distribution deals that include TV Everywhere rights. News Corp. said that it doubled its retransmission-consent revenue in the first quarter, which helped its TV division generate operating income of $171 million.
News Corp. saw its third-quarter 2012 revenue increase by 2 percent, to $8.4 billion. It posted net income of $937 million (38 cents per share), up from $639 million (24 cents per share) this time last year.
- see the earnings release
- see the earnings call transcript
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