Are Networks Changing Channels Without Cable’s Consent?

DirecTV (NASDAQ:DTV) and Time Warner Cable Inc. (NYSE:TWX) are not happy over six cable channels that are to undergo rebranding and name changes without the pay-TV operators’ consent.

The channels are being overhauled to attract more viewers and advertising dollars, but DirecTV and Time Warner have no control over the changes and are worried that networks will demand more money for the new programming. The companies claim that the networks agreed to carry certain programming, and changes to that leave the companies unsure about whether they can pass on fee increases the networks will charge for the new shows to customers.

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Channels that are undergoing the rebranding include News Corp.‘s (NASDAQ:NWSA) Speed. The channel, which previously focused on NASCAR, will become Fox Sports 1 in August. News Corp. is hoping the all-sports Fox Sports 1 will compete with Walt Disney Co.‘s (NYSE:DIS) ESPN, the most-watched sports network. News Corp. also plans to change Fox Soccer into FXX, which will focus on entertainment for younger audiences and include shows like “It’s Always Sunny in Philadelphia.”

Randy Freer, co-president of Fox Sports Media, said in an interview, “Our job is to create value for News Corp. To create asset value, you need to create programming that people want to watch. If people aren’t watching in either large enough numbers or with enough passion, then you have to evaluate where you can go in this landscape.”

Dan York, head of programming for El Segundo, California-based DirecTV, said in response, “You bargain for a specific service that you were pitched to meet the needs of consumers. If that doesn’t work, it doesn’t mean the content provider has a unilateral right to turn it into something else or even call it something else.”

Discovery Communications Inc. (NASDAQ:DISCA) has been one of the most aggressive rebranders in the TV world. Recently, Discovery Health became the Oprah Winfrey Network and Discovery Kids became the Hub, while Discovery itself has had several different identities in the past 10 years. Discovery has kept its coverage by avoiding fights with cable operators and agreeing to rate increases.

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In December, Time-Warner threatened to ditch low-rated networks, saying that being carried by the media giant “is not a birthright.” In the face of these channel changes, pay-TV providers may begin pushing for agreements that would allow them to drop rebranded networks.

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