NEW YORK (

TheStreet

) -- As the Jan. 1 deadline approaches, it's looking ever more likely that college-football fans who subscribe to

Time Warner Cable

(TWC)

will likely see static on their screens where the Fox network once was when they attempt to tune in to several big BCS bowl games the first week of January.

Despite Time Warner signaling Wednesday that it's ready to enter binding arbitration with

News Corp.'s

(NWS) - Get Report

Fox, time is running out for an agreement between the pair, who have been locked in a battle over carriage fees for months.

Fox rejected the Time Warner offer Wednesday afternoon, saying that it expects to pull its programming from the cable system at midnight on Jan. 1, when the contract between the companies is set to expire.

The war of words continued Wednesday. "We deeply regret that millions of Fox customers will be deprived of our programming," News Corp.'s operating chief, Chase Carey, wrote in a memo to employees.

"Consumers should not be held hostage during these negotiations. That's just wrong," Time Warner's CEO, Glenn Britt, told the

Associated Press

in an interview.

Whatever the outcome of the contentious talks, which have spread onto the airwaves in the form of political campaign-like ads meant to sway consumers in one direction or the other, it will have a pervasive impact on not only the television business, but media as a whole.

At issue are the extra fees Fox wants Time Warner to fork over -- a buck per subscriber each month -- in return for the programming on its flagship network.

If the parties agreed to that sum, it would subtract well over $100 million from Time Warner's annual revenue.

Though not insignificant, that figures pales in comparison to the true ramifications of a Fox-Time Warner carriage-fee deal. If News Corp. has its way, it would radically alter the way that TV networks and cable companies do business.

So far, the two parties have stood fast, showing little in the way of tractability. That's because both companies find themselves in difficult spots. Along with the mass media industry as a whole, from print to TV, Fox has had to deal since last year with as vicious an advertising recession as it has ever faced.

This summer, News Corp. chieftain Rupert Murdoch effectively made up his mind to go to war, not only in TV but in print as well. No longer flush with easy advertising revenue, the content-producer, he appears to have decided, will no longer give away its entertainments and its news. Any organization that distributes and sells that content -- whether it's a ubiquitous Internet search engine or a cable-TV provider -- will heretofore need to fork over a cut.

Other media outfits have seen a similar light, from the

Associated Press

, with has strived to fight

Google

(GOOG) - Get Report

; and

Disney

(DIS) - Get Report

, which recently came out with a statement of support for Fox.

Time Warner, for its part, has its own problems, none more serious than shrinking profitability as competition heats up -- from satellites, from the Internet -- and the troubled economy prevents it from hiking prices.

"You're at the point now where both parties feel they can't back down," said Matthew Harrigan, an analyst at Wunderlich Securities, who frankly indicated that he had no idea how things would eventually play out between the media giant and cable-TV operator.

Harrigan said that Fox's leverage in the ongoing scrape is topping out right now: with the college-football bowl season reaching its zenith (Fox is slated to televise the Sugar, Cotton, Fiesta and Orange Bowls), and with the hugely popular

American Idol

about to begin its new season.

Still, if talks don't move forward, News Corp., too, will feel pain. Yank its network from Time Warner, and the company will lose out on a massive chunk of advertising revenue.

Complicating matters even further, Fox doesn't necessarily

want

to the push the button on a nuclear option. Because it has a wide array of cable channels with a range of audience sizes, News Corp. might wish to maintain the status quo, which to some extent overcompensates lower-rated niche channels relative to the higher-rated, broad-based ones.

The binding arbitration idea was set in motion by Sen. John Kerry (D-Mass.). Under the plan, Fox and Time Warner executives would sit down with officials from the Federal Communications Commission, who would arbitrate. Many skeptics have viewed Time Warner's arbitration overture as simply another political move by the company to ingratiate itself with customers.

"This as complex a negotiating situation as you're going to find," said Harrigan. "Both sides have very meritorious arguments. It's a real conundrum."

Time Warner Cable shares ended trading Wednesday down 1.4%, or 60 cents, to $41.83. News Corp.'s more widely traded class-A shares declined 0.4%, or 6 cents, to $13.91.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.