After a year of negotiations, Fox Children's Network affiliates have agreed to sell their profit participation in FCN to Fox Kids Worldwide and Fox Broadcasting Co.
The price is said to be about $100 million.
The deal effectively puts to rest speculation that Fox, which will launch its kids cable service Fox Family Channel on Aug. 15, wished to exit the kids broadcast business and concentrate on cable.
"You can tell anyone who said we were getting out of broadcast that I said he or she is an idiot," said Haim Saban, chairman and CEO of Fox Kids Worldwide. "If we were going to get out, why would we make this deal?"
One FCN affiliate said some stations have grumbled about carrying kids programming because FCN ratings have dipped recently.
"When it's a good year in kids, they really want it, but when kids gets soft, they don't want it," the affil said.
As part of the agreement, FCN affiliates will commit to carrying the 19 hours a week of FCN programming for 10 years.
Officially, the deal won't be completed until Fox gets each station to sign the contract, which should occur over the next month.
Wednesday, the FCN Oversight Committee agreed to recommend that its entire affiliate body sign the contract. Both the network and the Oversight Committee expect all 172 FCN affiliates to sign the deal.
While some affiliates have indicated they may use proceeds from the FCN deal to help Fox defray NFL costs, the FCN agreement "stands on its own," said Fox network prexy Larry Jacobson, adding that he hopes to make progress on the NFL issue in the next two weeks.
"We wanted to get all the kids stuff out of the way," concurred Murray Green, senior VP of Malrite Communications and chairman of the Fox Affiliate Board. "The NFL was not part of the discussion at all."
Green said the NFL ball is now in Fox's court. The affiliate board has informed Fox that Fox stations don't want to make a cash contribution and that the maximum increase should be valued at no more than 39% higher than the contribution affils agreed to for the prior NFL deal. Fox paid a 39% increase to keep its NFL deal.
Fox affiliates said they wanted to sell their ownership stake in FCN because they believe FCN will be run more efficiently without the complication of the profit-sharing arrangement.
"It was strange for us to be in that business, and it didn't make sense after a while," said one FCN affil. "FCN will be able to make decisions quicker, and they'll have more motivation to make FCN work because it's their baby."
One of the points of contention on the FCN deal was the cross promotion time on FCN that Fox was seeking to use to plug Fox Family Channel. NBC has gotten flack from its affiliates when it has promoted CNBC and MSNBC shows, so how did Fox convince FCN affils to carry promo spots for its new cable channel?
"They're getting paid for it," Jacobson said with a smile.
As part of the FCN deal, Fox will receive 15 spots a week in children's programming to promote Fox Family or its other assets, said Green. This part of the deal expires after 3-1/2 years, when Fox has the option to purchase more cross promotion time.
"We'll be the only cable network that has a fully approved and extended promotional base on a broadcast network," Saban said.
Fox Family Channel will return the favor by running a certain number of promo spots for Fox's broadcast programming.
The roughly $100 million payment will be divided among FCN affiliates based on market size and ratings performance, similar to how the profit participation payments has been calculated. Fox Kids Worldwide -- the joint venture between Fox and Saban Entertainment -- will also gain rights to the FCN library, which includes "Bobby's World" and "Eekl the Cat."
FCN covers 98% of U.S. television homes through its 172 affiliates.
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