Fox Tries to Gain Leverage Over Affiliates on Live Streaming – The Wall Street Journal

Network started a 24-hour feed on Hulu in markets where it hasn’t come to terms with local stations

The headquarters of 21st Century Fox in New York.
The headquarters of 21st Century Fox in New York. PHOTO: BLOOMBERG NEWS
Fox is turning up the heat in a fight with its TV station affiliates over how to bring its programming to streaming-media consumers.
The network has quietly started offering a national, 24-hour feed on Hulu’s live-streaming TV service in more than 70 markets where it hasn’t come to agreements on streaming with local affiliate stations, including Baltimore, Pittsburgh, Cincinnati, and Birmingham, Ala.
Traditionally, the major broadcast networks—Fox, ABC, NBC and CBS —have made their entertainment and national news programming available through local stations, which fill out the rest of the schedule with local news and daytime fare.
So Fox’s move represents a drastic shift in approach, cutting out station owners and groups that own Fox affiliate stations in many markets, including Raycom Media Inc. and Sinclair Broadcast Group Inc. SBGI -0.21%
The national Fox feed is only live on Hulu, which is partly owned by 21st Century Fox , FOX -1.70% but people close to Fox said the network intends to launch it on other streaming outlets offering lineups of channels similar to cable TV offerings, such as AT&T ’s DirecTV Now and Sony Corp.’s PlayStation Vue.
Wall Street Journal parent News Corp and 21st Century Fox share common ownership.
In the place of local news and daytime programming, Fox has plugged into the stream some programming from sister cable channels like National Geographic, Fox Business Network and Fox News, as well as library programming from 21st Century Fox Television studio.
Among the shows from National Geographic that are filling in the gaps: “Diggers,” about people digging for old American artifacts, and “Building Wild,” in which the show’s hosts help people build wilderness getaways.
The move has raised the ire of some of Fox’s station affiliates. They say Fox has been offering terms far inferior to what rivals NBC, ABC and CBS are offering station owners for participation in streaming services.
At issue is how the two sides will divvy up their share of the monthly subscriber fees consumers pay for streaming services like Hulu’s. In at least some cases, Fox is offering station owners business terms that are 50% below that of other networks, people familiar with the matter said.
“Fox has elected not to make the same efforts in the same way the other three networks have,” one local station executive said. “You’re not providing something of value that reflects what the affiliate brings to the party.”
Fox executives are optimistic they will hammer out deals with affiliates. But in the interim, they want new streaming customers in every market to be able to watch live Fox programming.
Nexstar Broadcasting Group ’s chief operating officer, Brian Jones, who chairs the board of Fox-affiliated stations, said Nexstar is completing a deal with Fox for new streaming services.
Mr. Jones said Fox negotiated the right to offer such a feed as it struck its last round of agreements with affiliates, so the move isn’t entirely a surprise.
For the broadcast stations, ensuring they get their share of streaming TV fees is hugely important as traditional pay-television subscriptions decline. Companies like Sony PlayStation Vue have found it slow going to strike deals with the hundreds of local affiliates of the major broadcast networks across the country. EvenApple Inc., which has long toyed with getting into the TV business, struggled with how to overcome the hurdle of signing up broadcasters across the country efficiently.
While NBC, CBS and ABC negotiated with the boards that represent multiple affiliate groups, Fox opted to hammer out individual deals as local station owners’ agreements with the network come up for renewal, in a move that station owners say gives Fox more leverage.
Fox has come to terms with some station groups like Tribune Media, which owns 14 affiliate stations in such cities as Seattle, Denver and San Diego. In those markets, Tribune’s Fox affiliates will stream their feeds on the Hulu live-TV service, with Fox’s network programming included as usual. Tribune Media recently struck a deal to sell itself to Sinclair, which has yet to come to terms with Fox.
Offering its own streaming feed holds risks for Fox. Some broadcast industry executives noted that consumers who think they may be streaming the feed of a local Fox station may be disappointed when their local news programming isn’t available.
Other executives say it isn’t clear whether the network would have the rights to include NFL games on its streaming channel unless it has signed on the local affiliate. A Fox spokesman said all network programming will be in the 24/7 streaming feed.
The NFL declined to comment.
Write to Shalini Ramachandran at shalini.ramachandran@wsj.com