News Corp COO Threatens To Pull Fox Broadcast Signal If Aereo Prevails In Legal Battle

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Could Fox remove its broadcast signals and become available only as part of a cable subscription? That’s one possibility that News Corp. COO Chase Carey offered up as a business solution if it and other broadcasters lose their ongoing legal battle against streaming video provider Aereo.

In an interview with National Association of Broadcasters president Gordon Smith at the organization’s annual confab in Las Vegas, Carey said that if it couldn’t find a legal or government solution to the Aereo problem, Fox could go subscription-only in order to protect its dual revenue stream.

Aereo is a technology provider that pulls free, over-the-air signals from local broadcasters and makes them available to consumers both live and on-demand, in exchange for a monthly subscription fee. The service allows its customers to access those signals and recorded content on their computers, as well as through a large (and growing) number of mobile and Internet-connected devices.

But broadcasters like Fox believe that what Aereo does amounts to theft, in the sense that it is stealing their signals and rebroadcasting them for a fee, without paying retransmission fees to the content providers.

So far, Aereo has won a few minor legal victories: Last summer a New York district judge denied an injunction that would have effectively shut down the service while the case was in the courts. Last week, that decision was reaffirmed, as the U.S. Court of Appeals struck down an appeal to overturn the decision. In the interview, Carey called that decision disappointing, saying that Aereo was stealing its signal.

“We’re committed to broadcast, but we need to be fairly compensated from people who redistribute our signal… The dual revenue system is essential,” Carey said. “We will pursue our legal rights and we want to be clear that if we can’t defend our rights, we will take our network and make it a subscription service… We’re not going to sit idly by and let someone steal our signal.”

Carey said that ensuring it received retransmission fees as well as advertising dollars was necessary to keep producing the high-quality content, as well as getting the rights to big-ticket sports content through its NFL and MLB deals. “To continue to improve, there needs to be a business model that is viable.

But for Fox to pursue such a business solution would mean alienating its affiliates — the local stations which today distribute the content that Fox creates and licenses, as well as their own local programming. So it’s not a decision that the company is going to make lightly.

It also means not being available to a growing number of viewers who don’t subscribe to cable. Media-monitoring company Nielsen estimates that there are now about 5 million “Zero TV” households in the U.S. today, up from about 2 million in 2007. Zero TV is a bit of a misnomer, as it denotes people who aren’t paying for cable, but are getting their entertainment from other sources, like over-the-air signals or streaming, over-the-top video services.

About 85 percent of U.S. households subscribe to cable, so the vast majority would still have access to Fox. But the percentage of households subscribing is slowly decreasing.

While Fox considers its options, Aereo continues to fight its legal fight and expand into new markets. The company raised $38 million in new funding in January, bringing the total amount it’s raised to more than $60 million.

“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,” said Aereo spokesperson Virginia Lam. “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. Over 50 million Americans today access television via an antenna. 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.”