* Pay TV distributors likely to seek lower rates - sources
* Distributors evaluating Current TV contracts - sources
* Al Jazeera could pay distributors for coverage - analyst
By Liana B. Baker and Peter Lauria
NEW YORK, Jan 3 Al Jazeera's announced plans to
establish a new U.S. cable news channel via the purchase of
Current TV isn't even 48 hours old and already it finds itself
in a vicious battle to retain distribution rights.
Al Jazeera's acquisition of Current TV is basically a
pay-for-distribution play. The Qatar-backed network plans to
replace Current TV in the more than 40 million homes where it is
currently distributed with its own news network, tentatively
dubbed Al Jazeera America. The new network's success is
predicated on maintaining, if not increasing, that level of
One person with knowledge of cable TV deals said pay-TV
operators will definitely seek more favorable terms from Al
Jazeera since, "no one wanted to carry Current TV and they want
to carry an Al Jazeera channel even less."
For instance upon learning of deal, which closed on
Wednesday, Time Warner Cable immediately said that it
would terminate its contract with Current TV, meaning its
customers would not be seeing the new network to be named Al
On Thursday, however, the company, which ranks as the
nation's second largest cable provider with 12 million
subscribers, walked back from that stance a bit.
"We are keeping an open mind, and as the service develops,
we will evaluate whether it makes sense, for our customers, to
launch the network," Time Warner Cable said in a statement.
Al Jazeera has been trying to break into the U.S. cable
market for years, but the network has so far failed to gain
significant distribution largely for political reasons. The
Pan-Arab network had been viewed by many as being anti-American
particularly at the height of the U.S. War in Iraq.
Cable industry sources interpreted that statement to mean
that Time Warner Cable would be open to distributing Al Jazeera
America, just not at the same 12 cents per subscriber per month
that Current TV was receiving, media consultancy firm SNL Kagan
By comparison, SNL Kagan said Fox News averages 89 cents per
subscriber per month, while CNN gets 57 cents and MSNBC collects
Sources said that Dish Network Corp, DirecTV
and Comcast Corp are locked into programming
deals to carry Current TV for the next few years.
But sources said the distributors, each of which held
ownership stakes in Current TV, plan to re-evaluate their
agreements once they expire.
Dish, run by billionaire Charlie Ergen, is likely to be a
big obstacle that Al Jazeera will have to successfully overcome.
Dish is no stranger to dropping channels.
This past summer, for instance, it blacked out four AMC
Networks channels for roughly four months, and Ergen
regularly uses the company's earnings calls to rail against
rising programming costs.
Brean Murray analyst Todd Mitchell said Dish will likely
pounce on the opportunity to renegotiate terms with Al Jazeera,
now that the format and the owner of the channel have changed.
"Anytime Dish even gets the scent of leverage, something
opens for them to renegotiate, they start to renegotiate,"
Mitchell said. "This is the Dish way. Anytime they get a moment
of leverage, they'll think 'let me get you for cheaper,' and
will start negotiating."
A Dish spokesman said the carrier "has ongoing relationships
with both Current TV and Al Jazeera and we are evaluating the
future plans for Current TV."
Comcast ranks as the nation's largest cable television
provider with about 23 million subscribers. DirecTV, with just
under 20 million subscribers, and Dish Network, with 14 million
subscribers, are the two biggest satellite TV providers. Taken
together, those three companies would account for the vast
majority of the distribution. (Not every subscriber gets Current
TV, as it depends on the programming package they receive.)
The channel will also take over Current TV's distribution of
Verizon's FiOS and AT&T U-verse, which together have 8.9
A DirecTV spokesman declined comment. Comcast said it will
continue to carry Current TV as per its affiliate agreement. A
representative for Al Jazeera said nine operators will carry the
new channel, the largest being Comcast, DirecTV, Dish, AT&T and
PAY TO PLAY
Current TV generated an average nightly audience of just
42,000 viewers, steeply below ratings for Fox News, CNN and
MSNBC, all of which are "fully distributed," meaning they reach
more than 90 percent of the 100 million pay-TV households in the
Indeed, part of the reason why Current TV has lasted seven
years amid an environment in which low-rated, independently
owned networks of its ilk are being dropped by pay-TV
distributors is because of the influence wielded by its
co-founder, former Vice President Al Gore.
Though Gore will remain an adviser, Al Jazeera America will
be negotiating new distribution deals largely without his
Sources said that perhaps the only way for Al Jazeera to
prevent being dropped and ensure distribution is to take a page
from Rupert Murdoch, who 15 years ago, paid operators to carry
Fox News after it was created instead of asking them to pay him.
With Qatar's financial resources, it reportedly paid a rich $500
million for Current TV, that could be a viable short-term
"You can buy your way on. It's not unheard of for networks
to pay cable operators to get on," said Larry Gerbrandt,
principal of Media Valuation Partners, who added that such a
move wouldn't be a long-term strategy.
Al Jazeera has not had to offer money for distribution,