Is
the Ten Network’s deal on a production output contract with News Corp’s 20th Century Fox
in the US a
signal that Rupert wants Ten? Especially given the fact that News’s 25%-owned affiliate Foxtel was involved in the deal?

Sound
good enough to bank on, doesn’t it? But the situation isn’t as it
seems.

Firstly,
the contract was picked up by Ten after Seven announced earlier this year that
it was not renewing. Fox had
asked Seven if it wanted to continue and Seven said no because it wanted to
save the estimated $40 to $50 million a year to meet the costs of the
new AFL contract (with Ten) next year.

The
price Ten would have to pay for the whole contract was
too much so
Foxtel was introduced into the arrangement to share
the first run rights to some of the Fox output. Under the new deal (which starts in July 2007), Ten
will get first crack at all the new shows that Fox thinks will do well and Foxtel gets to go to the
annual screenings in the US (which start next week for
Australian commercial TV executives). Foxtel will be the junior partner
in the arrangement and make a financial contribution towards the annual cost,
lowering the amount of money Ten will have to pay Fox.

The
bonus for Rupert and News Corp is that it finds a home for more of Fox’s output in
Australia and that
Foxtel’s programming gets a more up-to-date
look.

Meanwhile, Foxtel CEO, Kim Williams, had a sharply-worded letter in today’s Fin Review. He was
denying, on the record, a report in The Fin that Foxtel had agreed to pay Seven and Ten $40 million a year for the pay TV rights to the AFL from
next year.

Using
words like “wrong” and “baseless”, Williams added that Foxtel will not negotiate the AFL rights through the AFR or
any other media vehicle. I hope
that includes News Ltd papers, especially The Australian and its Media and
Finance sections where there have been some interesting stories on the stand-off
from staff writers in the past month.

The
Fox output deal should smooth the ground for Ten and Seven to reach a deal with
Foxtel. But the
output deal was as much about improving Foxtel’s
programming and helping Ten lower its annual cost than
any precursor to a takeover by News Corp.

Peter Fray

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