Chase Carey Threatens To Make Fox A Pay TV Channel If Aereo Prevails

BREAKING…This would be a nuclear option for News Corp, which owns 27 TV stations and serves dozens of affiliates. But the company COO’s threat to take Fox off the public airwaves — made today at the NAB annual confab in Las Vegas — suggests how deeply concerned broadcast moguls are about the possibility that they might lose their legal battle against Aereo, and how much that could undermine their ability to extract retransmission consent fees from cable and satellite providers. Aereo uses tiny antennas to capture broadcasters’ over-the-air signals which it then streams to local subscribers. It does so without TV stations’ permission, and without paying them a dime. Broadcasters say that violates their copyrights. But last week a U.S. Appeals Court rejected the industry’s plea to shutter Aereo during the trial over that claim. What’s more, it seemed to favor Aereo’s counterargument that it simply rents antennas, enabling customers to watch transmissions already available to them for free.

If Aereo prevails — and cable and satellite companies decide that they, too, can retransmit broadcast signals for free — then Carey says “We have no choice but to develop business solutions that ensure we continue to remain in the driver’s seat of our own destiny. One option could be converting the Fox broadcast network to a pay channel, which we would do in collaboration with both our content partners and affiliates.” News Corp-owned stations collected about $308M in retransmission consent fees last year, SNL Kagan estimates. That’s up 20% vs 2011 and accounted for about 19% of their total revenues.

There’d be huge costs if Fox ditched the airwaves. It would mean that about 10% of TV households, which still depend on over-the-air transmissions, would stop receiving Fox programming. The network would have to replace local ads. It also raises questions about whether Fox could see any value for its stations, and whether communities would suffer from the loss of local programming and newscasts. Even so, Bernstein Research analyst Todd Juenger says that the economics of becoming a pay TV-only service are “seductive.” Fox theoretically could benefit by allowing the FCC to auction off its stations’ airwave spectrum to wireless broadband providers; the agency says it will share proceeds with stations that participate. But he adds that “the unknowable wild card that may trump every other line item on the financial analysis, is the branding value of the local presence, local news team, community-oriented face the broadcast station brings to the network — and how that translates into the sustained ratings dominance of those networks. Lose that presence, and soon all those broadcast networks really do become just another channel on the dial.”

Aereo’s Virginia Lam calls Carey’s threat “disappointing.” She adds: “When broadcasters asked Congress for a free license to digitally broadcast on the public’s airwaves, they did so with the promise that they would broadcast in the public interest and convenience, and that they would remain free-to-air. Having a television antenna is every American’s right.”

Here’s Fox’s release about Carey’s comments:

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