UPDATE 3: 11:02 P.M. ET, MONDAY

Fox: If Aereo Wins, Net Could Go Cable

News Corp. COO Chase Carey tells an NAB Show audience that, while it will continue with legal action to stop Aereo and other streaming services from distributing its broadcast signals without permission or compensation, it's prepared to take its broadcast network off the air and convert it into a pay channel, "which we would do in collaboration with both our content partners and affiliates.”

With the Aereo court decision still fresh, News Corp. President & COO Chase Carey says Fox would consider becoming a subscription-based network if broadcasters are not able to stop streaming services from retransmitting content without compensation.

“We won’t just sit idle and let people steal our signal,” Carey said during a Q&A at the National Association of Broadcasters Show in Las Vegas.

Being fairly compensated for content was a core theme of Carey’s remarks, who also said that “dual revenue streams” — meaning both ad sales and retransmission fees — is essential to broadcasting’s future.

Carey said in negotiating for retransmission fees, broadcasters are simply following the process under which cable channels have operated for decades except “what we receive for content is undervalued, especially when compared to cable.”

There is no compelling need for Washington to be involved in what should be “just private party negotiations,” Carey added. “We have the best programming and we need to be fairly compensated for it. It’s the way business is done.”

Carey said Fox’s return to the NAB Show in 2010 after a decade-long absence was indicative of a renewed commitment to having fruitful relationships with its own affiliates following their own contentious negotiations over retrans fees.

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“We came back to NAB to be part of the solution and to be working with broadcasters,” he said.

Carey called affiliate relationships “the core of our business” and said they will prevail “as long as we approach it with a sense of fairness and both realize our most exciting future is to work together and find solutions. A partnership is not healthy unless everyone is benefiting.”

Carey’s remarks came a week after a federal appeals court rejected broadcasters’ request to stop the Internet service Aereo from streaming their content without paying for it.

Broadcasters had argued that Aereo’s business of taking over-the-air signals for free and streaming them over the Internet to users who pay $12 a month infringed network copyrights. Aereo, which is currently only available in New York City, plans on breaking into 21 other cities later this year.

The court ruled that the TV networks suing Aereo failed to demonstrate “that they are likely to prevail on the merits of this claim in their copyright infringement action.”

Carey said the Aereo case is part of the larger problem of “piracy overall.”

“The broadcast business has to be one that allows us to be fairly compensated by those who want to distribute our product,” Carey said. “We need to be fairly compensated for our content.”

Broadcast reaction to Carey’s pronouncement was summed up by NAB President Gordon Smith: “He is trying to send a signal that we either win in the court or we will win in the marketplace.”

Noting that there have been conflicting appeal court rulings in broadcast streaming cases, Smith said the Supreme Court will eventually have to step in and it will find that “American copyright law applies to broadcasters. You can’t take somebody’s content, sell it to someone else and keep the money.”

Smith said broadcasters could try to block Aereo with legislation, but that it wouldn’t be easy.

“Having been a lawmaker, I can tell you the congressional remedy is long in coming and difficult, with a lot of cross-currents. The other side of that is that any member of Congress has to be concerned if broadcasters are put in a situation where they have to go to a subscription service.”

Asked if Carey’s move could have negative consequences in the battle over spectrum since he is saying Fox is ready to abandon its broadcast service, Smith said, “People will interpret it as they will. But he has certainly laid down a marker for a simple principle: We can’t produce great content for free.”

According to a Fox spokesperson, key Fox affiliates and affiliate board members were told in advance of Carey’s remarks.

“This was done in part to get the attention of Congress,” said one broadcast industry source who added that if Aereo and the like are allowed to proceed, service to the 54 million Americans who still rely on over-the-air television could be disrupted.

Aereo’s Virginia Lam made this statement on Carey’s announcement: “Aereo has invented a simple, convenient way for consumers to utilize an antenna to access free-to-air broadcast television, bringing television access into the modern era for millions of consumers. It’s disappointing to hear that Fox believes that consumers should not be permitted to use an antenna to access free-to-air broadcast television. 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.”

News Corp. released a statement from Carey following his speech. Here it is in its entirety:

“News Corp. has a long-standing commitment to the broadcast television business, and to delivering the highest-quality entertainment, sports and news programming to our viewers on a localized basis. We are committed to broadcasting under a business model where programmers receive fair compensation from parties that want to redistribute our product while continuing to make our product available for free to individual consumers that want to access our signal.

“We believe that Aereo is pirating our broadcast signal. We will continue to aggressively pursue our rights in the courts, as well as pursue all relevant political avenues, and we believe we will prevail.

“That said, we won’t just sit idle and allow our content to be actively stolen. It is clear that the broadcast business needs a dual revenue stream from both ad and subscription to be viable. We simply cannot provide the type of quality sports, news, and entertainment content that we do from an ad supported only business model.  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.”


Comments (19)

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E B says:

April 8, 2013 at 2:57 pm

Good riddance. That will do further damage to the Fox O and O ratings. I look forward to seeing primetime I Love Lucy on channel 11 here in LA,

    Christina Perez says:

    April 8, 2013 at 3:38 pm

    Aha! So that’s it! Dyle and these other streaming services are a false front, a Potemkin Village, to do by subterfuge what network TV execs dare not do above-board — announce that they are abandoning free, over the air broadcast TV to join the ranks of the pay TV greedsters. That’s it, isn’t it, Fox? Admit it — just like CBS President Les Moonves did several years back in a moment of frank indiscretion. Well, you will be destroying the most efficient mass medium on the planet, but it’s not really the advertisers you’re worried about, but a quick means of bolstering your own bottom line (even if it kills the medium just when the public is clamoring for “wireless” network TV.

kendra campbell says:

April 8, 2013 at 3:10 pm

Typical Fox/Carey bluster. Yawn.

Manuel Morales says:

April 8, 2013 at 3:11 pm

Chase’s “announcement” is exactly what people have told the MVPD players who desire Local affiliates for free. IF they ever succeeded in overturning the retrans regime OR going around it like Aereo is trying to do the logical next step is for the Networks and their desired programming to go “straight to cable”. This is likely what the Nets desire anyways but the political pressure would be immense sans retrans being rendered moot. This of course would be a terrible result for the MVPDS as instead of shelling out $1/sub for WXYZ-TV they will shell out $5 /sub for FOX-Net and then another $5/sub for FOX-Net Sports. The Nets would certainly gain her but the MVPDs and Broadcasters would both lose and lose big.

Jason Crundwell says:

April 8, 2013 at 3:12 pm

Why the hatred for the affils? This will kill all of them and put a lot of people out of work. The judge is completely wrong in this case. The programs are released for private viewing only, as are all broadcast programs. Taking them for free and then charging people to view them is simply illegal.

    Julie Caracciola says:

    April 8, 2013 at 4:16 pm

    You are correct in a limited sense. It is technically not legal under U.S. copyright laws governing public performances for a third party to specifically charge for the performance unless they operate under the U.S. Compulsory License granted to cable TV entities (and the like) just for this purpose. Such entities must contribute royalty payments for this privilege each year. Aereo claims that it is not a cable distributor, as that term is defined under FCC rules. It offers OTA delivery via the same right as any master antenna service provider, such as what is permissible to every condominium and hotel who wishes to offer its residents access to OTA local television. This distribution is completely legal and encouraged by Commission rules. The caveat, however, is that the MASTV operator/service provider not charge viewers for a service which they could otherwise receive for free by installing an antenna. Some nominal charges are permitted such as maintenance, etc., but these charges must be reported and well-documented to insure that the service is revenue-neutral. Broadcasting is by its nature a “public” (not private) performance media. The OTA stations are in no financial danger is they use their unique delivery resource properly and refrain from falling back on easy money from network retransmission fees.

    John Murray says:

    April 8, 2013 at 7:37 pm

    “The OTA stations are in no financial danger if they use their unique delivery resource properly and refrain from falling back on easy money from network retransmission fees.”

    Huh…??

Terry McGovern says:

April 8, 2013 at 3:31 pm

Why is the assumption the the affiliates would be losers here? Carey implied (and it seems to make the most sense) that the current affiliate/network partnerships would remain. Affiliates would just sell off their licenses/spectrum and go to wire-only model. Networks still need the local programming to fill the day and it gives them more leverage over the MVPDS to have a local audience.

Julie Caracciola says:

April 8, 2013 at 3:55 pm

If The FOX Television Network wishes to abandon the OTA broadcast business and revert to a cable pay channel, I expect that they will simply see their ratings drop to numbers comparable to those of every other cable TV channel. So what’s the point?

Broadcast television stations are legally required to make their primary program channel available to the public without charge in exchange for receiving exclusive use of their television spectrum. That is a fact of life and it doesn’t matter what a network executive’s opinion of this is. When FOX provides its programming to an affiliate TV station and licenses its programming for public performance within that station’s DMA, it does so with the explicit understanding that its programming will be available to any viewer within that DMA without charge. Complaining about viewers not having to compensate FOX because they chose not to utilize a cable TV delivery system shows that this network executive has no meaningful understanding of Part 73 broadcast television service rules in the U.S. Even more disturbing is the implication that is somehow now the affiliate station’s responsibility to insure that their OTA signal is not seen by viewers without being charged for the privilege. FOX and every national network must soon decide which business arena they want to play in. The recent court ruling about public access to OTA television speaks volumes about where the industry is headed.

Incidentally, any TV station can opt to broadcast a subscription TV service (e.g. STV) on either its primary or secondary channels. Such STV stations must continue to offer free and generally-accessible public affairs and children’s programming in-the-clear. The few stations who have attempted to operate a Pay TV service over the years have failed to interest enough viewers to continue STV and soon relaunched as free OTA stations. So the history of having to pay for TV is revealing: as soon as a content provider opts to charge its viewers — they just stop watching.

But then some folks don’t learn from history.

WHDT-TV

Ellen Samrock says:

April 8, 2013 at 3:56 pm

This just shows how little Fox thinks of terrestrial broadcasting and their affiliates. They really would rather cut off their nose to spite their face.

Andrea Rader says:

April 8, 2013 at 5:40 pm

Carey, I suspect, anticipates a future in which free OTA television shifts to a conditional access model tied to subscription income. The current ATSC standard provides for such a platform but has not been implemented yet. Count on ATSC 3.0 to enable this capability.

    Christina Perez says:

    April 8, 2013 at 7:54 pm

    “newsbot” lives up to his name by basing his prediction on technology, not on what ultimately will decide the issue — POLITICS and PUBLIC OPINION.

Doug Halonen says:

April 8, 2013 at 7:54 pm

The whole thing is silly. Aereo is not a subscription TV service. It is a signal enhancement. If the audience measurement companies were up to speed, Fox and everyone else would be able to get coin for the additional audience delivery. Broadcasters need the “dual revenue stream” only because the government licensed too many stations, and gave the store away to cable. I have written that the NAB Code should be revived. We need to make broadcasting special by limiting the number of commercials in an hour of TV. We also need to make cable stand on its own without “block booking” which was prohibited to the film industry in the 1940s.

    Angie McClimon says:

    April 9, 2013 at 12:04 pm

    However, they are talking about added ESPN, Bloomberg, and other subscription TV services. If they do that, the hypothesis that they are not subscription TV will be refuted and they will be another multi-video distributor.

Joanne McDonald says:

April 8, 2013 at 8:40 pm

If that happens, there will be affiliates that will be forced to switch to another network like WBRC gets ABC, KDVR/KFCT gets CW, WDAF gets NBC, KTVI gets ABC, WGHP gets ABC, WJW gets CBS, WITI gets CBS, and KSTU as an unaffiliated independent station. FOX would have to sell WHBQ to someone like Journal, LIN TV, or Meredith and turn it into an ABC affiliate and would do the same with other own and operated stations. Sinclair owns the most number of stations affiliated with the FOX Network.

Every FOX viewer should be ashamed of both Chase Carey and New Corporation for choosing to have FOX being a cable network with it being scrambled and available “only by subscription” if Aereo wins. I feel that Chase Carey and News Corporation are trying to be way too big being the Wal-Mart’s, the Paramount Pictures with the movie theater chain of the 1940’s, the Clive Davis’s of when he was at Columbia Records in the early 1970’s, the Neil Bogart’s of Casablanca Records fame of the 1970′s disco era, the Trinity Broadcasting Network’s, the David Smith (one of the Smith brothers from Sinclair Broadcast Group), the Perry Sock and the Nexstar Broadcasting Group, the Harry Pappas as part of the Pappas Telecasting Companies, the Bernard Madoff’s, the Enron’s, the Worldcom’s, the Adelphia’s, the Tyco’s, the Martha Stewart’s, the Jill Kelley’s, the Orie sister’s, and the Jesse Jackson Jr’s, of the 2000′s by letting broadcast greed get out of control so all of the head employees and bosses at News Corporation to be able to enjoy carefree lavishly spending to support carefree lavishly lifestyles with luxurious homes, luxurious yachts, luxurious jets, luxurious cars, join luxurious clubs, be in luxurious cruises, go to luxurious conventions, go to luxurious hotels, go to luxurious casinos to do gambling, throw luxurious parties, and have other luxurious items just to make them very happy then trying and willingness to keep FOX as a broadcast network. I hope and I wish that Chase Carey and News Corporation get scolded by both by the ACA and the FCC for making the viewers being forced to deal FOX turning into a cable network if Aereo wins. I hope and I wish that Chase Carey and News Corporation is barred from buying and owning anymore TV stations in the future after their final decision to turn FOX into a cable network if Aereo wins. I feel that Chase Carey and News Corporation are trying to bribe like the General Tire/RKO General of the 1960′s and 1970′s by not being very honest of not only the viewers by making sure Aereo goes out of business and turns FOX into a cable network and also on themselves. I would gladly love to see that Chase Carey and News Corporation to surrender, give up, and forfeit control of all the stations they owned and control and then the FCC would allow all the broadcasters be allowed to purchased any of the stations Chase Carey and News Corporation owns and control with all the broadcasters being required to make a real big concession that they would promised not to have any difficulties with all the cable and satellite operators when making deals to carry stations without any interference for 12 consecutive straight whole years. I feel that Chase Carey and News Corporation are way too big being way too busy being the Baauer Harlem Shake, the PSY Gangnam Style, the Carly Rae Jepsen Call Me Maybe, the Nicole Westbrook It’s Thanksgiving, the Rebecca Black Friday, the Double Take Hot Problems and the Guns N Roses Axl Rose as well as trying be act like the Jerry Sandusky’s as the assaulters, the Jodi Arias’s, the Casey Anthony’s, the Charles Starkweather’s, the Charles Manson’s, the Lyle and Erik Menendez’s, the O. J. Simpson’s, the Scott Peterson’s, and the Drew Peterson’s as the greedy murderers, the Lindsay Lohan’s as the drunk and the drug abuser, the Rodney Dangerfield’s, the John Belushi’s, and the Chris Farley’s as the comedians, the Gordon Gekko’s, the Victoria Grayson’s, the Victor Newman’s/the Jack Abbott’s, the J. R. Ewing’s/the Cliff Barnes’s, the Charles Montgomery Burn’s, the Homer and Bart Simpson’s, the Peter Griffin’s, the Mickey Mouse’s/the Minnie Mouse’s, the Bugs Bunny’s/the Daffy Duck’s/the Porky Pig’s, the Garfield cat’s, the Cookie Monster’s, the Miss Piggy’s, and the Pillsbury Doughboy’s, of the broadcasting industry of wanting to turn FOX into a cable network if Aereo wins. I feel that Chase Carey and News Corporation are trying to turn into the 1919 Chicago White Sox’s baseball team and the Southern Methodist University football of the 1980′s to force FOX viewers to deal with FOX being a cable network if Aereo wins. I urge all of the viewers of the FOX Network to boycott Chase Carey and News Corporation right now for wanting to turn FOX into a cable network with it being scrambled and available “only by subscription” if Aereo wins in a big huge ugly game of baw baw baw baw baw baw baw baw baw baw baw baw chicken in the future of the cable and broadcasting industry.

Aereo would be useful for stations to inform viewers for news and weather reports. I feel that all of the fat cat politicans and the fat cat television broadcast station owner and parent want to see free to air digital television from a antenna to go away and force all of the cable and satellite operators to pay up a lot more money for the rights to carry local stations so all of the fat cat politicans and the fat cat television broadcast station owner and parent can have carefree lavish spending to fully support their endless greedy lavish lifestyles for their own political gain is so very shameful and so very disgraceful in my own personal opinion and theory.

    Jaclyn Hansen says:

    April 8, 2013 at 11:02 pm

    For those of you not in the print business, the above response is a good example of how to write something virtually no one will read. Your eye/mind suffers fatigue because there’s too much type to absorb without a “breather,” so to speak in super long paragraphs. (I can tell you in the middle of this thing, he gives out Rupert’s home phone number and there’s another part in which the writer imitates a chicken. Too bad you missed it.) The moral: Write short paragraphs.

    Mike Crowell says:

    April 9, 2013 at 10:42 am

    “the above response is a good example of how to write something virtually no one will read.” Really–TLDR.

Peter Grewar says:

April 8, 2013 at 10:14 pm

Anyone remember the threats about a decade ago that if the “broadcast flag” were not put in place for OTA digital, all the top content was going to be removed from broadcast and moved to cable? The “broadcast flag” was tossed by the courts, and the programming stayed on broadcast networks…so I’m a little skeptical of the threats.

Bobbi Proctor says:

April 9, 2013 at 9:56 am

If FOX goes only to cable we the viewers of OTA will again be the losers. We would lose FOX programming and any move by a FOX station to another network could cause that other station to go off the air. Program choices will be further limited and FOX would be lowered to cable quality signals. This could lead to all networks moving exclusively to pay TV and why should network need affiliates? The networks could add more programming (maybe some repeats) and and sell all of the time. We currently rely on local TV stations for important weather and other local information. With no competition I don’t see this being provided by cable or satellite. A switch to cable would mean an additional $100 a month out of our family budget. We are retired and won’t pay it. Yes, we could afford it, but have higher priorities. But there are some who cannot afford it.


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